Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

GREAT NORTHERN LONDON CEMETERY BILL [Lords]

Read a Second time and committed.

LERWICK HARBOUR ORDER CONFIRMATION BILL

Considered; to be read the Third time tomorrow.

Oral Answers to Questions — DEFENCE

Early Warning System

Mr. Arnold: asked the Secretary of State for Defence what further consultations have taken place between Her Majesty's Government and her NATO allies on the development of an advanced early warning system.

The Secretary of State for Defence (Mr. Roy Mason): I attended a meeting of the Defence Planning Committee on 11 th June, when Ministers agreed the lines on which the future work required was to be done. The results of these studies will be presented at the December 1976 ministerial meeting of the DPC.

Mr. Arnold: What estimates have the Government made about the cost effectiveness of AWACS in comparison with the advanced early-warning Nimrod, and on what assumptions are those estimates based?

Mr. Mason: No such comparisons have yet been made. As far as the Boeing E3A is concerned, we are still trying to arrive at a contract definition, and this

in the end, will determine to what extent the British Government or other NATO Governments will play a part. However, we have kept the Nimrod development alive and we have told our NATO partners that it is theirs for acquisition.

Dr. M. S. Miller: Is it not a fact that the AWACS development will cost a lot more than Nimrod? In addition, Nimrod would use engines manufactured by Rolls-Royce, which would give employment to people in this country.

Mr. Mason: There is no doubt about the latter point. As far as costs are concerned, these are dependent on how many E3As are ordered and to what extent they will have an enhanced capability. The numbers and sophistication of the system will determine the cost to the public.

Mr. Goodhew: How much have the Government spent on the E3A programme already? The House would like to know how far things have gone, if possible by the Summer Recess, if we are to have a recess.

Mr. Mason: We have made a small contribution to the contract definition study, because we want the Americans to make proposals before the end of the year and we want to encourage development. Apart from this, the Germans and ourselves have paid in $4 million to the end of 1976.

Nuclear Weapons

Mr. George Rodgers: asked the Secretary of State for Defence what is his policy with regard to the use of the British independent nuclear weapon capacity.

Mr. Mason: All British nuclear forces, including the Polaris submarines, are assigned to NATO, although they are under the ultimate control of the Prime Minister and could not be used without his consent. If NATO were to collapse we would have to take our own decisions, but while it exists our forces remain committed to the Alliance.

Mr. Rodgers: Does my right hon. Friend agree that it would be unthinkable for this nation to use this weapon as a first strike and quite futile to use it subsequently? In what circumstances,


therefore, does he envisage its being used?

Mr. Mason: It could be used subsequently if necessary. The Polaris has a second strike capability, and we have that second strike capability while we have Polaris. Because we have it, this country will not be subjected to nuclear blackmail. We hope that it will deter, but if the deterrent did not succeed we would have the right and the capability for a retaliatory strike.

Mrs. Bain: Can the Secretary of State indicate how long he expects Polaris and Poseidon to continue to be sited on the Clyde in view of the fact that their siting is near a major population centre?

Mr. Mason: Polaris will continue for many years yet. Even in a conventional war, and without a nuclear capability in Britain, this island, because of its support base and its importance to Western Europe, would still become a target.

Mr. Robin F. Cook: Will my right hon. Friend categorically deny the allegation by the World Watch Institute last month that Britain is developing a new generation of mini-nuclear weapons which depend on gamma radiation rather than explosive force?

Mr. Mason: I have told my hon. Friend many times that we are not embarking on a new generation of strategic nuclear missiles. I will look at the report he has mentioned, but I guess that it is sheer Press speculation.

Army (Combat Units)

Mr. Gow: asked the Secretary of State for Defence what is the present strength of the combat units of the Army; what were the equivalent figures on the same date in each of the last two years; and to what extent the Army is at present below establishment.

The Under-Secretary of State for Defence for the Army (Mr. Robert C. Brown): It is not our practice to provide information on strengths of combat units.
Annex E to the Defence White Paper (Cmnd. 6432) outlines the strength of the Army in terms of numbers of major teeth arm units. There has been no change in the past two years although certain units have been re-rolled as a

result of our planned reduction in parachute capability.
The strength of the Army is at present at 96 per cent. of establishment.

Mr. Gow: In view of the growing strength of the armed forces of the Warsaw Pact countries, is the Minister satisfied with the strength of our own armed forces? Is he satisfied that the contribution we make to NATO is commensurate with the threat facing the United Kingdom?

Mr. Brown: Yes.

Mr. Canavan: Would not the establishment and the morale of the Army be improved if more consideration were given to the relatives of soldiers? What is the up-to-date position relating to one of my constituents, Private Ogilvie, who was murdered in Germany about six weeks ago? His body has not yet been brought back to his mother for burial.

An Hon. Member: He should have been a mercenary.

Mr. Brown: My hon. Friend knows, as a result of speaking to me almost daily for some weeks and the correspondence we have had, that I have the deepest feeling for the family of this young lad who was murdered in Germany. I am quite sure that his family and everyone else would wish to see the perpetrators of this crime brought to justice. That is why the body is being held in Germany.

Mr. Onslow: Why did the Government think it right to reduce our contribution to SACEUR strategic reserve by cutting the size of the United Kingdom mobile force? Will the hon. Gentleman dissociate himself and his right hon. and hon. Friends from hon. Members below the Gangway on the Government side whose main concern seems to be to reduce the Army and the other Services to the level of a ceremonial sham?

Mr. Brown: The reduction in the SACEUR strategic reserve was a matter of contention on the last occasion I was at this Box. I put it right in correspondence with the hon. Member for Woking. As previously announced, our contribution has been reduced, but we still provide a very valuable contribution to the SACEUR strategic reserve.

Mr. Flannery: Many of us have noticed the expensive and lengthy television advertisements for the Armed Forces. Are they beamed at the unemployed? Does my hon. Friend agree that many young people joining the Services would be better off in trade unions, and will he consider the establishment of trade unions in the Armed Forces?

Mr. Brown: The question of trade unions in the Armed Forces was fully covered in the last defence debate by my hon. Friend the Under-Secretary of State for Defence for the Royal Air Force. There is no question of the advertisements being beamed at the unemployed. More than ever, we are seeking the best-quality applicants for the Army.

Suffield Training Grounds, Canada

Mr. Edwin Wainwright: asked the Secretary of State for Defence what purpose is served by the Suffield training grounds in Canada; how many men visit Suffield for training purposes each year; and what is the cost to Her Majesty's Government.

Mr. Robert C. Brown: Suffield is used to train mechanised Army battle groups for their NATO rôle and is the only training area in which they can carry out live firing in the course of tactical manoeuvres. Each year, seven battle groups or about 5,000 men train there. Annual running costs to the Ministry of Defence are about £4 million at present.

Mr. Wainwright: Is my hon. Friend satisfied that the cost of this training is worth while? As the training of NATO troops is a joint affair, what facilities have been offered to other NATO countries to train with British troops in this area?

Mr. Brown: I am wholly satisfied that Suffield provides the kind of training which is necessary and which we could not obtain elsewhere. The money spent in this area is extremely well spent. This is a British Army training area, but we hope that Canadian units will take part in exercises for the first time later this year.

Mr. Geoffrey Finsberg: Does the hon. Gentleman agree that the site provides a unique opportunity for the training of large formations? Is there any possi-

bility of the lease being extended when it expires?

Mr. Brown: The lease runs until 1981. We should have to negotiate for an extension at that time. Suffield is an area of 750 square miles in which manoeuvring and live firing can take place without restriction. It is a unique and superb training area.

Mr. Conlan: Is my hon. Friend aware that his reply is not very convincing? Will he recognise that his Department should not wait until the lease runs out in 1981 but should be engaging in meaningful discussions with the Canadian Government for the continuing use of Suffield?

Mr. Brown: My hon. Friend is more than begging the question. Clearly, we do not intend to sit on our haunches until 1981 before actively considering the future.

Mr. Townsend: As the number of posts abroad for British Service men continues to diminish, will the Minister do all he can to get new training areas in other Commonwealth countries for British soldiers?

Mr. Brown: That is another question, but while we have Suffield we do not need to worry too much about facilities.

Arms Sales

Mr. Newens: asked the Secretary of State for Defence what are the criteria for determining the countries to which Great Britain is prepared to sell arms.

Mr. Mason: Questions about Government policy on the criteria for determining the countries to which Great Britain is prepared to sell arms are really for my right hon. Friend the Foreign and Commonwealth Secretary to answer. But it is Government policy to consider sales of equipment to any country, subject to the relevant political, military, security and financial criteria and our obligations to our allies.

Mr. Newens: Is there not a strong case for refusing to sell arms to both sides in a potential conflict—for instance, Israel and her Arab neighbours—and for refusing to sell arms to exceptionally repressive regimes such as those of Iran, Indonesia and Brazil? Is there not also a strong


case for revising the criteria, especially as all the countries that I have mentioned were invited to participate in the recent defence sales exhibition?

Mr. Mason: This is more a question for my right hon. Friend the Foreign Secretary. As far as the Middle East is concerned, we always examine arms requests to make sure that they will not endanger a just and lasting peace in that area. Iran is a member of CENTO and an ally and is entitled to make requests for arms.

Mr. Gwynfor Evans: Does the right hon. Gentleman remember that those who engage in the horrible traffic of arms used to be castigated by the Labour Party as merchants of death, yet the Labour Government now seem to be proud that they are one of the main salesmen of arms in the world, selling to both sides in disputes and to the poorest countries in the world? Is he not ashamed that while the Government are refusing aid to these poor countries they are increasing their capacity to kill?

Mr. Mason: The hon. Gentleman is wrong in saying that we are one of the leading arms salesmen. We are far behind America and Russia and it is a matter for argument whether we or the French are a very poor third. The hon. Gentleman and the House should recognise that we take a moral stance on a much higher plane than any other country with the capacity to sell arms and that this has damaged our relations with many nations.

Mr. Frank Allaun: Would my right hon. Friend consider following the moral stance and example of Germany, Japan, Sweden, Switzerland and many other countries which refuses to sell arms to any country involved in or likely to become involved in a war?

Mr. Mason: My hon. Friend is quite wrong. Germany sells arms abroad and is reconsidering its policy about selling more. Japan does not have the capacity to do so.

Mr. Amery: Does the right hon. Gentleman agree that as Soviet influence moves progressively, with the sale of arms, into Angola, Mozambique, Somalia and some other African countries, it is important that we should do everything we can, on reasonable commercial terms, to ensure that countries such as Kenya, Zaire,

Zambia and South Africa receive adequate supplies of military equipment?

Mr. Mason: Apart from South Africa, these countries occasionally make requests and, depending on the criteria, they all receive the same consideration.

Recruiting

Mr. Canavan: asked the Secretary of State for Defence whether he is satisfied with the recruiting methods used by the Armed Forces.

The Under-Secretary of State for Defence for the Royal Air Force (Mr. James Wellbeloved): On the whole, yes, Sir.

Mr. Canavan: Is my hon. Friend aware that on a recent visit to a school fete, along with my wife and young family, I was confronted with an armoured car and other military equipment and personnel encouraging young people to play a game called "Shoot to Kill"? Will he take steps to stop this glamorisation of violence, which seems to be aimed at recruiting young people of an impressionable age into the Armed Forces from areas of high unemployment?

Mr. Wellbeloved: If my hon. Friend will be kind enough to send me details of the case to which he refers, I shall look into it. I can assure him that it is not the Department's practice to go to schools trying to persuade young people to join the Armed Forces against their will. The recruiting teams and advisers who visit institutions such as schools are most careful to present a balanced picture of life in the Armed Forces and to point out to young people that it is an honourable and exciting career that they could enter if the so wished.

Mr. Geoffrey Finsberg: Does the hon. Gentleman agree that the immorality is more likely to be in the mind of the original questioner?

Mr. Wellbeloved: I have great confidence in and comradeship towards my hon. Friend. I do not share the views expressed by the hon. Gentleman.

Expenditure

Mr. Andrew F. Bennett: asked the Secretary of State for Defence what are


the results of changing values of sterling on estimated defence expenditure.

Mr. Loyden: asked the Secretary of State for Defence if he will publish an estimate of the increase in Great Britain's overseas defence commitments on the basis of the present sterling exchange rate as compared with 12 months ago.

Mr. Ron Thomas: asked the Secretary of State for Defence if he will give an estimate of the increased cost of Great Britain's defence commitments overseas on the basis of the present sterling exchange rate as against 12 months ago.

Mr. Mason: The Estimates for defence spending overseas for 1976–77 are contained in Table 5 of Annex A to this year's Defence White Paper. These figures were based on exchange rates ruling in autumn 1975, the conventional price base for Estimates. The main cost arises in Germany and the average exchange rate of the £ sterling against the deutschemark in July 1975 was not significantly different from that used in the Estimates. The depreciation of the £ sterling against the deutschemark since the Estimates were prepared has been about 13 per cent. The actual cost of our commitments will depend on movements in exchange rates throughout the whole of the financial year.

Mr. Bennett: I thank my right hon. Friend for his reply. What progress is being made in persuading the West Germans to make a greater contribution to the cost of keeping our forces in Germany?

Mr. Mason: My hon. Friend will notice that there is a specific Question later on the Order Paper on the Anglo-German offset agreement.

Mr. Loyden: Does my right hon. Friend agree that there is a contradiction in the Government's economic strategy, directed as it is towards resolving the problems facing the British economy? We are concerned with the gold reserve and balance of payments, yet we continue with countries like Germany, which have a tremendous economic advantage over this country, with this level of expenditure.

Mr. Mason: If my hon. Friend was referring to Germany's present economic circumstances compared with ours, and meaning that it should make a greater financial contribution to the next Anglo-German offset agreement, I agree with him.

Mr. Tebbit: Does not the main answer suggest that there is a good case for exporting more arms and military equipment and using the Armed Forces to help us to do so, which would enable us to pay the costs of our own vital defence services overseas?

Mr. Mason: No, I should not go so far as to use the Armed Forces purposely to start selling arms abroad.

Mr. Thomas: Does my right hon. Friend agree that if we had spent 50 per cent. less over the past decade on our overseas commitment we should have saved about £2,000 million in foreign currency, which could now have been used to buttress sterling, and we should not be faced with threats from international bankers to cut public expenditure? Do I understand my right hon. Friend aright when he says that the cost of keeping British troops in Western Germany will now rise to about £450 million a year?

Mr. Mason: That is too great a supposition to allow me to follow down that path with my hon. Friend. We promised in the 1974 General Elections that we should carry out our commitment to the electorate—namely, to start withdrawing our forces from abroad. We have already completed the withdrawals from Gan, Mauritius and Singapore. We are helping to better the economic circumstances of the nation by cutting out many of our overseas commitments and concentrating upon our NATO rôle.

British Defence Forces

Mr. Blaker: asked the Secretary of State for Defence whether it is now his policy that British defence forces should be maintained and not reduced except in the context of an agreement on mutual and balanced force reductions with the Easternbloc.

Mr. Mason: As stated in the 1975 Statement on the Defence Estimates and reiterated since, we do not envisage any


reductions in the central region in advance of an MBFR agreement.

Mr. Blaker: Will the right hon. Gentleman confirm that the words of my Question are a direct quotation from the latest communiqué of the ministerial meeting of the NATO Defence Planning Committee? Presumably Her Majesty's Government committed themselves to them. Will the right hon. Gentleman confirm that they apply not only to forces on the ground on the Continent but to any reinforcements?

Mr. Mason: They apply especially to the 65,000 who are stationed in the central region—namely, 55,000 in the Army and the Tactical Air Force.

Mr. James Lamond: Has my right hon. Friend read the speech made by Lord Goronwy-Roberts when addressing the seven hundred and eighth plenary session of the Disarmament Talks in Geneva, which have been proceeding since 9th September 1959? If he has read that speech, does he support the part of it that suggests that the British Government are now ready to co-operate with the Soviet Union in sending experts to Geneva to work out the best methods of further disarmament and the reducing of defence expenditure of all 31 countries involved in the talks on arms?

Mr. Mason: I have not read the speech, but I should be interested to participate in world-wide conferences on multilateral disarmament. Surely it comes ill from those who believe that the Soviet Union is ready to do that when it has been established that it has been spending between 11 per cent. and 12 per cent. of its gross national product on defence expenditure in the past five years.

Mr. Ian Gilmour: In view of the considerable and dangerous cuts that the Government have already made in defence expenditure, will the right hon. Gentleman assure the House that when the Government announce their further cuts in public expenditure later this month, or later this year, defence will be excluded from them?

Mr. Mason: I do not think I can give the House the categoric assurance that the right hon. Gentleman seeks. No

doubt some claims will be made upon the defence budget.

Mr. Gilmour: Resist them.

Mr. Mason: What they may be I know not yet. However, I do know, and the right hon. Gentleman will know, that, whether we are battle weary or war shocked, we have had some experience and we shall be ready for the Chancellor's call.

Mr. Dalyell: Should not my right hon. Friend read Lord Goronwy-Roberts' speeches?

Mr. Mason: Only to catch up with the deliberations of my hon. Friend the Member for Oldham, East (Mr. Lamond) in his supplementary question.

Sales Exhibition, Aldershot

Mr. Cryer: asked the Secretary of State for Defence if he will make a statement on the defence sales exhibition held at Aldershot.

The Minister of State for Defence (Mr. William Rodgers): I refer my hon. Friend to the answer I gave my hon. Friend the Member for Harlow (Mr. Newens) on 29th June 1976.

Mr. Cryer: Is my right hon. Friend aware that this side of the House condemns the sale of arms by Russia, America and other countries, especially in a world in which two-thirds of the people go hungry every night? Does he accept that the display at Aldershot was an immoral encouragement of the sale of arms? Does he accept that in the longer term it will mean a loss of jobs, because our industrial capability will be overtaken by countries such as Japan which refuse to join in this death-sales race and instead concentrates on peaceful purposes? Will my right hon. Friend now reject the present concept as an affront to the trade union and labour movement and the whole of humanity?

Mr. Rodgers: I am ready to agree with my hon. Friend that the arms trade is not a happy business. However, if we believe, as successive Governments have done, that it is right to sell arms to our friends in different parts of the world, it would surely be hypocrisy not to have the sort of exhibition lately held at Aldershot. As regards the latter part of my


hon. Friend's question, I do not believe he believes that if we were to stop all defence sales now others would follow, or that it would not result in large unemployment at a time when we can least manage it.

Mr. Lawrence: How many jobs would be lost if we cut out arms sales?

Mr. Rodgers: It is extremely difficult to say, but, obviously, many thousands.

Mr. Litterick: Does not my right hon. Friend agree that the list of nation States represented at the Army equipment exhibition at Aldershot shows that the vast majority of potential customers for British armaments are nation States whose systems of Government are hideously undemocratic? Does not that make a mockery of the United Kingdom's international stance as a defender of freedom and individual liberty?

Mr. Rodgers: My hon. Friend raises the difficult question of how many systems of government in the world we would all wholly approve of. That is not a basis for international relations. On that basis we would have diplomatic relations with virtually no one outside Western Europe and North America. This is a commonsense business to which we must have a robust approach. There were no representatives from South Africa or Chile at the exhibition and, apparently, most people thought that the exhibition was organised in a sober and proper way.

NATO

Mr. Luce: asked the Secretary of State for Defence when he next proposes to meet the Secretary-General of NATO.

Mr. Lane: asked the Secretary of State for Defence when he next expects to attend a NATO ministerial meeting.

Mr. Mason: I expect to meet Dr. Luns at the NATO autumn ministerial meetings. The dates have not yet been fixed.

Mr. Luce: In view of the warnings of the Secretary-General and British defence advisers that the balance of power is tilting dangerously in favour of the Warsaw Pact Powers, will the Minister take this opportunity to reassure the Secretary-General that the British Government are totally opposed to the pro-

posals of the Tribune Group for further cuts in defence expenditure, which would be bound to endanger the freedom of the British people?

Mr. Mason: If I accepted the latest proposal of cuts of £1,000 million in addition to the cuts which have already been made, at best that would be a policy of neutrality and at worst it would be surrender.

Mr. loan Evans: Will my right hon. Friend tell Dr. Luns that we are spending more on defence and less on domestic investment other than any other Western European nation? As a nation, we must get our priorities right. We cannot afford the burden of our present defence expenditure. Unlike the Opposition, who are demanding increases, if we are to have public expenditure cuts, should not the Government cut defence expenditure?

Mr. Mason: My hon. Friend referred to industrial investment. During the past three years the defence budget has played its part, and it will play its part during the next few years, in allowing the reallocation of resources. From the time when we took office to the year 1979–80, we shall have cut back projected expenditure by £2,300 million involving real, not "phoney", cuts.

Mr. Lane: In view of the further evidence published by the Institute for the Study of Conflict about the world-wide growth of Russian naval power, will the Government, with other members of NATO, take an initiative towards organising a more urgent and realistic response to ensure that Western interests worldwide are properly safeguarded?

Mr. Mason: I have told the House previously—perhaps the hon. Gentleman was not aware of this—that NATO commissioned a study two years ago by the Supreme Allied Commander, Atlantic of a contingency plan ready to operate beyond NATO's borders in time of war, should that be necessary.

Mr. Ron Thomas: How does my right hon. Friend justify his statement that there is a case for saying that defence should be based on a figure per head of the population? On that basis, what would be the defence expenditure of China and India in relation to that of Britain?

Mr. Mason: I am not aware that China and India are menacing either the United Kingdom or the Western European Alliance.

Mr. Ian Gilmour: When the Secretary of State meets Dr. Luns will he assure him that, while the anti-West, anti-NATO and anti-democratic views of the Tribune Group are obviously widely shared in the Parliamentary Labour Party, they are repudiated by the vast majority of people in this country?

Mr. Mason: When the Parliamentary Labour Party as a whole is fully conversant with the effect of a £1,000 million cut on jobs in the aircraft and shipbuilding industries and industrial investment, I doubt whether it will follow that line.

Departmental Staff

Mr. MacFarquhar: asked the Secretary of State for Defence what reductions in the central staffs employed by his Department in London he anticipates by 1st January 1979.

Mr. William Rodgers: We aim to achieve reductions in keeping with the changed needs of the Services. I cannot quantify these at the moment but they will make a useful contribution to the overall reductions of 40,000 which we shall be making by 1st April 1979.

Mr. MacFarquhar: Is it true that the Ministry of Defence is currently investigating the possibility of a 10 per cent. cut in its London staff? Will that reduction be genuine, or will it be a matter of abolishing posts but allowing the occupants to stay on and serve out their time? Will my right hon. Friend assure the House that the chairborne generals and bureaucrats will bear a higher proportion of any reductions than will the fighting forces?

Mr. Rodgers: In general, I can probably give my hon. Friend the assurances for which he asks. Certainly the savings which we make will be in the headquarters staff, although I want to make absolutely clear that there are many able and dedicated people there to whom we should pay tribute for the work they have done over many years. The cuts will be real, and I hope that the Ministry of Defence will set an example to the whole of Whitehall.

Mr. Blaker: Will the right hon. Gentleman look into the circumstances surrounding Fleet Bank House, Salisbury Square, which has recently been occupied by his Department? Is he aware that, according to a parliamentary answer given by a Minister from the Department of the Environment and other information reaching me, the building remained unoccupied for more than a year after rent started to be paid, during which period over £1 million was paid in rent and £1·8 million in modification costs? If cuts are contemplated in staff, why it is necessary to occupy that building. Has there not been a scandalous waste of taxpayers' money?

Mr. Rodgers: The story is an entirely new one to me, but I shall certainly look into it. On the face of what the hon. Gentleman says, there appears to be a problem of neglect.

Mr. Dalyell: What would be the effect on headquarters staff of a separate Scottish army, navy and air force? How far advanced is the projected White Paper on separate Scottish forces?

Mr. Rodgers: I have always thought the idea of separate Scottish forces such a dangerous nonsense that I am afraid I have not gone into the detailed examination which would enable me effectively to reply to my hon. Friend.

Mr. Dalyell: What about the White Paper?

Cyprus

Mr. Cohen: asked the Secretary of State for Defence what is the cost of continuing to station United Kingdom forces in Cyprus other than those on United Nations duty.

Mr. Wellbeloved: The budgetary cost of our forces in Cyprus is estimated to be £36 million in 1976–77.

Mr. Cohen: Will my hon. Friend tell the House the foreign exchange costs? In the light of an earlier reply given by the Secretary of State about the question of withdrawal of troops, will my hon. Friend say what proposals or plans the Government have in mind for the withdrawal of United Kingdom troops from Cyprus?

Mr. Wellbeloved: The foreign exchange costs at present run at about £28 million. We have no plans for the withdrawal of British forces from the Sovereign base areas in Cyprus. The United Kingdom contribution to the United Nations force is a matter for my right hon. Friend the Foreign and Commonwealth Secretary and other Ministers, who would have to make an assessment before I could give my hon. Friend an effective reply.

Mr. Geoffrey Finsberg: Does the hon. Gentleman agree that any sudden withdrawal of British forces from the Sovereign base areas would be a breach of an undertaking and calculated to start a terrible bloodbath between the Turkish and Greek Cypriots?

Mr. Wellbeloved: It would not be helpful for me to speculate on a matter which is not even under consideration by the Government. There are no plans for the withdrawal of British forces from the Sovereign base areas in Cyprus.

Mr. Christopher Price: Will my hon. Friend confirm that there is no question under treaty of the British Government giving up the sovereign base areas in Cyprus unless we first hand them over to the legitimate Government of the Republic of Cyprus?

Mr. Wellbeloved: I can hardly foresee any circumstances in which, if the British Government were contemplating a withdrawal from Cyprus, they would wish to hand over the sovereign base areas to any authority other than the Government of the Republic of Cyprus; but all these matters are for my right hon. Friend the Foreign and Commonwealth Secretary, not for me.

Harrier Aircraft

Mr. Ford: asked the Secretary of State for Defence what progress has been made in discussions with the United States of America with a view to the purchase of advanced versions of the Harrier for the United States Marine Corps.

Mr. William Rodgers: The United States Navy is considering a programme for development of an improved Harrier—AV8B—for service with the United States Marine Corps. An announcement by the United States authorities on

whether they have decided to proceed with the first stage of their programme is expected shortly.

Mr. Ford: Is my right hon. Friend aware that shop stewards' committees throughout the country will welcome his reply? The progress in the sales and licensing of this unique piece of British technology is to be welcomed. Will my right hon. Friend say how many people are employed on the project?

Mr. Rodgers: I endorse what my hon. Friend has said. An order of that kind would be very important in terms of licensed firms' production work and, therefore, of jobs. I cannot put a figure on jobs but I expect that it will involve several thousand.

Mr. Wall: What progress has been made on sales of aircraft to China and the Sea Harrier to Iran?

Mr. Rodgers: We are prepared to sell aircraft where they are required within the rules which the Government set down to determine defence sales. We are alert to all possibilities and will consider them all, including those mentioned by the hon. Gentleman.

Mr. Tebbit: Shall we have the right Ito manufacture and sell in this country for export the versions of the Harrier which may be developed in future with the United States, or have we made over to the United States the whole of the rights in exports of that technology?

Mr. Rodgers: I cannot give an offhand answer on all the details of the contract. I think, however, that the hon. Gentleman may take it that, whereas we are hopefully selling this important technology to the United States at considerable benefit to ourselves, at the same time we shall ensure that the residual advantage of the aircraft remains with the United Kingdom.

Mr. Cronin: Will my right hon. Friend assure us that in negotiating these arrangements he will bear in mind that, despite the agreement between the Government and the United States, there has been a considerable lack of reciprocity?

Mr. Rodgers: I take my hon. Friend's point about reciprocity. There is now a two-way street, and we hope that a purchase of this kind will be part of it.

Battle Tank

Mr. James Johnson: asked the Secretary of State for Defence what progress has been made in conjunction with the German Government towards an agreed formula for the next generation of main battle tank.

Mr. Robert C. Brown: We are making satisfactory progress in the studies that we are currently undertaking with the Federal Republic of Germany in order to define a common tank for the late 1980s.

Mr. Johnson: Will my hon. Friend go so far as to accept that it would make common sense for the allies in Western defence to have a similar concept of this type of machine or weapon? Can he forecast the numbers that might be made, because it could mean a lift in jobs for people in the engineering industry?

Mr. Brown: The current phase of the studies will take about another year and, therefore, we are not yet at the stage at which we can talk about numbers. It is generally acknowledged that towards the end of this century many countries will be renewing their tank fleets, and we therefore have a great opportunity of selling new tanks.

Mr. MacFarquhar: In view of the known differences between the British and the German Governments about the configuration of the proposed tanks, will my hon. Friend assure the House that if agreement is not reached Britain will be able to go ahead with its own tank? Will that tank include the armour that we have invented?

Mr. Brown: Assuming that the discussions come to nothing, we would have the ability to produce our own tank, and clearly we would have the ability to produce the new armour.

Mr. Geoffrey Finsburg: Will our tank be ready in time to supply the Canadian Army, which is seeking to re-equip its forces over the next two years?

Mr. Brown: That is another question. If the timescale is two years, I doubt whether we would be in that position.

Mr. Litterick: Does my hon. Friend agree that the concept of the tank as a battle weapon is dubious because it is

vulnerable to weapon systems which it cannot reach? Will he give an assurance that the Department is rigorously examining the concept of the main battle tank as a weapon system?

Mr. Brown: I do not believe that my hon. Friend has learned the lessons of the Yom Kippur war, otherwise he would realise that the vast majority of tanks that were killed were killed by tanks in the same way as the vast majority of aircraft killed were killed by aircraft.

Mr. Onslow: Does the Minister think that our chances of getting agreement with the German Government on this matter, or getting a working agreement to offset costs, are increased by the amount of unilateralism coming from below the Gangway on his side of the House?

Mr. Brown: In any discussions with us, the Government of the Federal Republic of Germany realise that they are discussing whatever issue it may be with the Government of this country.

CBI

Mr. Norman Atkinson: asked the Prime Minister when next he intends to meet the leaders of the CBI; and if he will make a statement.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): As the House knows, my right hon. Friend is in Brussels attending a meeting of the European Council, and in his absence I have been asked to reply.
My right hon. Friend met representatives of the CBI—and of the TUC—when he took the chair at the meeting of the National Economic Development Council on 7th July. Further meetings will be arranged as necessary.

Mr. Atkinson: Does not my right hon. Friend agree that the best explanation for the CBI's reluctance to discuss with the NEDC the whole question of British industrial management is that it is conscious of the quality of British industrial management? Does he agree that it is possibly management's quality which is the most significant factor in Britain's poor industrial performance? Does he agree that higher management is a poor mix of brilliance and mediocrity and


that there is no known system for talent-spotting in industry? Will he recommend to the Prime Minister the setting up of a management advisory council so that the Government at least can equip itself with some talent to occupy the vacant jobs?

Mr. Foot: I certainly agree with my hon. Friend that improvement in management is obviously one of the things that is desirable and highly necessary for a general improvement in British industry. From my own knowledge of the discussions in the NEDC, I can assure him that management's performance has often figured as a topic. I am not sure whether my hon. Friend's proposal is the right one, but I shall suggest it to my right hon. Friend.

Mr. Grylls: Will the right hon. Gentleman ask the Prime Minister to raise with the CBI the question of the low level of investment in industry? Is he aware that according to Government figures it has dropped from 13 per cent. in 1960 to 2 per cent. today? Does he agree that the modest change in the Price Code is not enough?

Mr. Foot: Those matters are constantly discussed by the NEDC and the CBI. Changes in the Price Code followed full discussions with the CBI.

Mr. Robinson: Is my right hon. Friend aware that there is an urgent need for the exemplary co-operation between the Government and the trade unions to be buttressed by a real commitment by management to a tripartite attack on our industrial problems? Does he agree that this could be best met by managements being willing to increase investment in manufacturing industry in Britain?

Mr. Foot: All hon. Members on this side of the House, and probably many on the other side, will probably agree with my hon. Friend. Lord Watkinson gave a commitment on behalf of the CBI which was welcomed by the Government. We hope that that can be carried further in the future.

Mr. McCrindle: Is the right hon. Gentleman satisfied that the CBI continues to speak effectively on behalf of the many smaller firms in Britain? Is it not time that the whole structure of these discussions between the Prime Minister

and the NEDC were reformed so that the Prime Minister and the Government could get a better idea of what the smaller firms were thinking about investment, employment and profitability?

Mr. Foot: I doubt whether it is my business to say how representative the CBI is of British industry generally. Small firms, as well as the CBI, have the opportunity of putting their views to the Government.

WEST GERMANY

Mr. Adley: asked the Prime Minister if he will pay an official visit to West Germany.

Mr. Foot: I have been asked to reply.
As the hon. Member will know, my right hon. Friend visited the Federal Republic of Germany on 30th June, but he has no plans to do so again in the immediate future.

Mr. Adley: Is the right hon. Gentleman aware that the German National Tourist Board has recently been allocated more resources for the attraction of foreign visitors, in contradistinction to the attitude of Her Majesty's Government, who constantly seem to be attacking service industries in general and tourism in particular, thus causing, for instance, the Chairman of the English Tourist Board to claim that the development land tax will hamper the development of tourism throughout the country? [HON. MEMBERS: "Declare your interest."] Would the right hon. Gentleman—

Mr. Speaker: Order. From both sides we have had long questions, and long questions in Prime Minister's Question Time are selfish questions. Mr. Adley, to finish.

Mr. Adley: Will the right hon. Gentleman invite the Prime Minister to discuss this matter personally with Herr Schmidt the next time they meet?

Mr. Foot: I do not know whether it is necessary to have such discussions and I do not know the exact comparison between the figures spent on tourism in both countries. I should think that the figures also show—this is a guess, but I imagine that it is correct—that many


more visitors come to this country than go to West Germany.

Mr. Spearing: Is my right hon. Friend aware that the previous time that the Prime Minister went to Germany he went to the Ubersee Club in Hamburg, where he gave an excellent address on the basis of the future of the Community, in which he suggested that the nations of the Community should co-operate, without one country imposing its will on the other? The Prime Minister said that it was his personal view, and my right hon. Friend the Member for Huyton (Sir H. Wilson) said that he agreed. Is it not time that the Government now came to that view themselves?

Mr. Foot: The Prime Minister will be returning from Brussels tomorrow and will be making a statement to the House on the discussions that he has had there. My right hon. Friend is of age and he can speak for himself.

Mr. Tugendhat: Will the right hon. Gentleman ask the Prime Minister to confer with Herr Schmidt about the absolute shambles of the position into which Germany and Britain got at the recent UNCTAD conference? No one would expect the British Government to accept proposals with which they disagree, but the inflexibility and lack of constructiveness of the British and German positions harmed the Community, the developing world and, most important, this country.

Mr. Foot: I know that there were criticisms of what occurred at the UNCTAD conference, but it has also been said by several of my hon. Friends who took a special interest in the matter—including my right hon. Friend the Member for Lanark (Mrs. Hart)—that it was the Prime Minister's intervention which assisted in the last days of that conference, and that that showed the British Government's interest in the matter.

Mr. Ashton: With regard to tourism, is the deputy Prime Minister aware that there are nevertheless many instances right now of exploitation and rackets, particularly as outlined in the London Evening News this week? Will he, in his other capacity, set up a Select Committee to examine tourism and perhaps probe some of the allegations made?

Mr. Foot: I am not sure whether Select Committees are always the best bodies to examine these matters, but I shall seriously consider what my hon. Friend has said.

Mr. Charles Morrison: When the Prime Minister next visits Germany, officially or unofficially, will the right hon. Gentleman ask him to make efforts to discover the connection between the success of the German economy and the German electoral system, which has so much in common with the recent suggestion of the Hansard Society?

Mr. Foot: I do not know whether anyone would seriously suggest that the German economic position is due to the electoral system there. One of the matters which the Prime Minister discussed with the German Chancellor when he was there, and which is certainly a subject that I would have thought was connected with industrial performance, was the whole question of industrial democracy. They had very interesting exchanges on that matter and I believe that those exchanges can help this country to progress further and more speedily in that direction.

MINISTERIAL BROADCASTS

Mr. Ioan Evans: asked the Prime Minister when he last made a ministerial broadcast.

Mr. Foot: I have been asked to reply.
On 5th April.

Mr. Evans: Does my right hon. Friend agree that a good alteration to ministerial broadcasts would be for the proceedings of the House to be broadcast? In discussions with the Prime Minister, will he arrange to bring forward the debate in which the House is to make final arrangements for our proceedings to be broadcast?

Mr. Foot: I entirely agree. The House has voted for the broadcasting of its proceedings and I should like it to happen as speedily as possible. I hope that we shall have a resolution on the subject before the recess. There are some difficulties, but I entirely agree with my hon. Friend; it would be of great advantage to the House as a whole if that could happen.

Mr. Whitelaw: If such statements are to be made in the House, will the right hon. Gentleman give us an assurance that before the recess a statement will be made showing exactly what line the Government intend to take about public spending? Will they take the view apparently held by the Chancellor of the Exchequer, that such cuts have to be made, or will they take the view apparently held by the Secretary of State for Energy and the Home Policy Committee of the Labour Party, that any such cuts would be disastrous to the economy?

Mr. Foot: The right hon. Gentleman seems to be jumping to too many conclusions based on a cursory reading of the newspapers over the last few days. I hope that he will await the statement which the Prime Minister has suggested will be made—we hope before the recess. I think that the best course is to wait for that.

Mr. Whitelaw: Is the right hon. Gentleman saying that a statement will be made before the recess?

Mr. Foot: The right hon. Gentleman will not be surprised to hear that I have nothing to add to what the Prime Minister has already said on this subject.

Mr. Crawford: When the Prime Minister makes a ministerial broadcast will he be able to give a copper-bottomed guarantee that the forthcoming round of public expenditure cuts will mean no cutback in conventional defence at Kinloss, Rosyth or anywhere else in Scotland?

Mr. Foot: I do not believe that that is the form which a broadcast by the Prime Minister should take and I do not believe that the matter can be dealt with by way of answers to questions of that nature.

Mr. Greville Janner: Will my right hon. Friend make a ministerial broadcast on the current hideous rumours about the fate of Mrs. Dora Bloch? If it transpires that it is correct that she has been murdered in cold blood, will my right hon. Friend bear in mind the views of her sons, first, that President Amin is a most dangerous savage and, second, that no international aircraft traveller is safe while hijackers have allies like him?

Mr. Foot: I have seen the report in the evening papers but we have no confirmation of it. It is at the moment a report in a Kenyan paper. But I should also add to the statement made by the Minister of State for Foreign and Commonwealth Affairs, yesterday. Since he made that statement, there have been very worrying further developments. The Second Secretary in our High Commission in Kampala was expelled on President Amin's orders late last night and left for Nairobi this morning. The Ugandan authorities have also told our High Commission of President Amin's instructions that two members of the British community will be expelled today and that further action will be taken after the Security Council meeting.
I have just learned that all the heads of diplomatic missions in Uganda have just been summoned to a meeting with President Amin this afternoon. Our Permanent Representative at the United Nations made very clear our concern over these developments in his intervention in the Security Council last night. The President's threats have now been formally exposed to the world community. I repeat that I have full confidence in the accuracy of the reporting of our High Commission in Kampala and I am certain that it has acted perfectly properly in the period of strain, as in so many periods past.
As my right hon. Friend said yesterday, our primary concern is for the safety of the British community, numbering altogether about 550 people, remaining in Uganda. In view of President Amin's remarks about the future of the British community, I consider it of paramount importance not to take any provocative step until the community's safety is assured. They are a seasoned bunch of campaigners, as the Prime Minister recognised when he spoke to them in Uganda a year ago. They have made their decision to live there and they recognise the risks.

Mr. Evelyn King: On a point of order—

Mr. Speaker: Order. If the hon. Member will raise his point of order after Question Time, I shall be able to call Question No. Q4.

Mr. Foot: I apologise if the House thinks that my statement was rather lengthy—

Mr. Arthur Lewis: It should have been made later.

Mr. Foot: I understand my hon. Friend's interest in the matter and the interest of the rest of the House, but I thought that since my hon. and learned Friend the Member for Leicester, West (Mr. Janner) had raised the matter, and since it is a matter of great and natural public interest, it was right to give the House the latest information.

CHANCELLOR OF THE EXCHEQUER

Mr. Nigel Lawson: asked the Prime Minister if he will dismiss the Chancellor of the Exchequer.

Mr. Foot: I have been asked to reply.
I refer the hon. Member to the reply which my right hon. Friend gave to the hon. Member for Eastbourne (Mr. Gow) on 8th July.

Mr. Lawson: Is the right hon. Gentleman aware that that answer is wholly unsatisfactory? Why is it that he and his colleagues imagine that they know how to manage British industry, when it is abundantly clear that neither they nor he can maintain even the Government's own business with any degree of competence?

Mr. Foot: I am sure that when the hon. Gentleman said that the previous reply was wholly unsatisfactory it meant only that he could not recall what it was. But what the Prime Minister said on that occasion was
The House may assume that I do not intend to make any further ministerial changes unless and until I make a statement to the contrary."—[Official Report, 8th July 1976; Vol. 914, c. 622.]
That seems to me to be a very satisfactory statement.

Mr. Heffer: Does my right hon. Friend accept that although some of us are not happy with some of the Chancellor's statements at this moment we are not necessarily in favour of his dismissal? Will my right hon. Friend accept that many of us would be bitterly opposed to any cuts in public expenditure which could lead to further unemployment? Will he bear in mind that many years ago he

moved the Adjournment of the House under Standing Order No. 9 on the question of the IMF letter of intent? Will he tell the House that the Government are not pursuing policies of a similar kind at this moment?

Mr. Foot: I entirely agree with my hon. Friend that it is of paramount importance in the present situation to do our very best to prevent any rise in unemployment and to bring down a level which is already much too high. That is one of the prime considerations which the Government are taking into account. As for a comparison of events with 1966, I do not always believe that historical parallels are instructive. In any case there has not been an approach to the IMF on the basis that occurred in 1967.

Mr. Gow: Does the Lord President accept that excessive Government expenditure is one of the causes of unemployment? Will he advise the Prime Minister, when he returns from his meeting in Europe, that the one step he should take to reduce unemployment is to dismiss the Chancellor of the Exchequer?

Mr. Foot: I do not accept the hon. Gentleman's simplistic doctrine. I believe that there are occasions, as the Prime Minister underlined in the recent censure debate, when public expenditure can fortify employment. That must be taken into account also.

Mr. Dalyell: Could the Chancellor of the Exchequer's attention also be drawn to the 40 down-to-earth Written Questions which have been tabled on the project of coverting the Royal High School into a Scottish Assembly? How can we, on the one hand, deprive local authorities of £47 million on their cherished projects in Scotland and, on the other hand, envisage this colossal expenditure on Assemblies in Edinburgh and Cardiff?

Mr. Foot: I know that my hon. Friend the Member for West Lothian (Mr. Dalyell) takes an extremely idiosyncratic view on this subject. He is entitled to express his views, but I have to make clear to him that his view is certainly not shared by the great majority of Members on this side of the House. Furthermore, it is not borne out by commitments in the Labour Party manifesto.

Several Hon. Members: rose—

Mr. Speaker: Order. I am about to make a Privilege ruling, but I am prepared to take first points of order.

QUESTIONS TO MINISTERS

Mr. Evelyn King: On a point of order, Mr. Speaker. On Question No. Q3 the Lord President of the Council was asked when the Prime Minister had last made a ministerial broadcast. However, the Lord President answered that Question by making a three-minute speech, presumably seeking to save time which should have been devoted to making a statement after Question Time. In other words, the right hon. Gentleman used Prime Minister's Question Time for that purpose. I suggest that that procedure is out of order and should not have occurred, and I hope that it will not recur.

Mr. Speaker: I am doing my best to get shorter questions and shorter answers, an aim which I believe is in the best interests of the House. I do not recall that the reply by the Lord President of the Council took three minutes.

Mr. Gow: Further to that point of order, Mr. Speaker. Is it not an abuse of the procedure of the House for the Lord President to read out a prepared statement in answer to Question No. Q3, which had nothing to do with Mrs. Bloch? Should not the Lord President instead have undertaken to make a statement on that matter separately?

Mr. Cryer: On a different point of order, Mr. Speaker. This is a matter on which I should like your ruling. Is it not an abuse of the procedures of the House for the hon. Member for Christchurch and Lymington (Mr. Adley) on Question No. Q2 to the Prime Minister to ask for more public expenditure on the tourist industry, in contrast to the view taken by the majority of his party, who seek to cut public expenditure, and for the hon. Gentleman not to disclose—I know that it is not a requirement, but I believe that it should be—the fact that he has a financial interest as the European Marketing Director of Commonwealth Holiday Inns of Canada?

Mr. Frank Allaun: Further to that point of order, Mr. Speaker. There is an

hon. Member in this House who takes part in defence debates, who asks questions on such matters and who is a director of a highly profitable armaments firm. Is it not part of the procedure and practice of this House that an interest should be declared? Therefore, although I do not wish to name the hon. Member concerned because I have not given him notice, may I ask you, Mr. Speaker, whether you will tell the House what kind of conduct you expect in relation to the declaration of such interests in future?

Mr. Speaker: Before I hear any other points of order, let me deal with the last two. The House should know that there is no requirement at Question Time for hon. Members to declare interests. That is part of the practice of the House.

Later—

Mr. Lawson: On a point of order, Mr. Speaker. I am sorry that I did not hear your ruling to the point of order raised by my hon. Friend the Member for Dorset, South (Mr. King). Is it, or is it not, an abuse of Prime Minister's Question Time for a Minister to make an important statement in the course of it rather than at the end of it?

Mr. Speaker: I am sorry that the hon. Gentleman did not hear my ruling. I said that I deplore long questions and long answers. Clearly I think that the House felt that the Minister had taken the opportunity by this Question to make an important statement both to this House and to the country. However I think that, in general, it is preferable that statements are made after Questions.

MEMBERS' CORRESPONDENCE WITH MINISTERS

Mr. Arthur Lewis: I wish to raise another point of order, Mr. Speaker. I am sorry that I have not had an opportunity to give you notice of my intention to raise this matter, but it came to hand only a moment or two ago. We know that it is your job to protect the interests of Back Benchers and to see that hon. Members are not precluded from carrying out their duties to their constituents. Obviously, you do all you can, Sir, to facilitate hon. Members in carrying out their duties. I wish to raise a serious


point which is generally applicable and which affects a number of hon. Members—

Hon. Members: Too long.

Mr. Russell Kerr: Keep going, Arthur; you are doing very well.

Mr. Lewis: I refer, Mr. Speaker, to the growing practice of all Ministers in failing to give prompt answers to correspondence from hon. Members. In that way they are depriving the taxpayer, who pays Ministers' salaries, of replies to their letters. I have tried to raise this matter with the present Prime Minister, the former Prime Minister, with Ministers concerned and also with the Leader of the House. I have been able to get no satisfaction on this point whatever.
Let me quote an example. I have a letter here that was sent by me on 11th June and today, 13th July, I received a formal acknowledgment from a private secretary saying that the matter will be considered. [HON. MEMBERS: "Hear, hear."] This may be a laughing matter to some hon. Members, but we have a Civil Service that is well paid, officials in the Home Office who are now going off to get £65,000 a year, and they cannot even deal with their own correspondence. I object on behalf of the taxpayers who are not receiving prompt answers to their letters. This is typical of the Home Office in particular, and, indeed, of most Departments.

Mr. Speaker: The hon. Gentleman obviously feels strongly on this question and, no doubt, so will others if they are kept waiting, but it is not my responsibility. The hon. Gentleman has been allowed to express his feelings on this matter.

Mr. Lewis: Further to that point of order, Mr. Speaker. May I put to you the reason why I think that it is the responsibility of the Chair? I explained, when I was being rudely interrupted by some laughing hyenas, that I believe that Mr. Speaker has the opportunity and, indeed, the duty to see that hon. Members are not precluded from doing their duty. If we have civil servants and Ministers deliberately refraining from sending letters to hon. Members, they are holding up the chance of hon. Members doing their duty. I would suggest, Mr. Speaker, that

if you perhaps had a word with the ministerial people concerned they might shake themselves up a bit.

Mr. Speaker: I almost said that I am obliged to the hon. Gentleman but I am not sure that I am. I would say to him that if Mr. Speaker took on himself the responsibility of chasing Departments who do not answer letters quickly he would be in dire trouble.
On the other question, may I just say that the hon. Gentleman used an expression, to which nobody took exception, when he said "laughing hyenas". I always object to the use of animal terminology when applied to hon. Members of this House and I believe that we ought to try to keep our language parliamentary.

Mr. Lewis: Further to that point of order, Mr. Speaker. In view of what you have said, Sir, and in deference to you and the Chair, I obviously withdraw the expression and say "the Ken Dodds opposite".

QUESTION OF PRIVILEGE (MR. SPEAKER'S RULING)

Mr. Speaker: I have considered the complaint made yesterday, on grounds of privilege, by the hon. Member for Christchurch and Lymington (Mr. Adley) arising from the action of the National Union of Public Employees in asking for written statements from hon. Members of this House sponsored by them. I have taken into account the resolution of the House on 15th July 1947 on this subject. I am satisfied that the complaint made by the hon. Member does not raise issues such as would justify me in allowing precedence over the Orders of the Day to a motion relating to it.

OFFICIAL REPORT

Mr. Gow: On a point of order, Mr. Speaker. Yesterday the Leader of the House said that he would look into the situation which had arisen following the failure of the Official Report to appear for 2nd July, in response to a point which had been put to him by my right hon. Friend the Member for Down, South (Mr. Powell). Can the Lord President tell us why it is that we still do not have the Official Report for 2nd July and


whether we shall be able to have an Official Report for that day?

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): Further to that point of order, Mr. Speaker. We are seeking to overcome this problem but I would prefer to make a statement tomorrow if I may.

Mr. Tebbit: Not during Question Time.

EMPLOYMENT PROTECTION ACT (AMENDMENT)

3.44 p.m.

Mr. Stan Thorne: I beg to move
That leave be given to bring in a Bill to amend the Employment Protection Act 1975.

Mr. Speaker: Order. Will hon. Members please leave the Chamber quietly if they have to leave before the Ten-Minute Rule Bill?

Mr. Thorne: I hope that not too many of them will come back when I have introduced the Bill.
The Bill seeks to amend the Employment Protection Act in certain particulars. It is worth recalling the first sentence of the Employment Protection Act which states:
An Act to establish machiney for promoting the improvement of industrial relations".
That is a specific aim and it seems to me that the whole basis of that Act was to proceed with that aim. Unhappily, one of the problems that we have had for many years in industry has not been particularly assisted by the passing of the Employment Protection Act. The problem I refer to is the large number of trade unions that we have in industries, in plants, and on construction sites, which seek to bedevil industrial relations in those particular areas. Many hon. Members on this side of the House have been anxious to see mergers and amalgamations in order to create a situation which make negotiations, recognition, involvement in decision making, and so on, easier.
Some managements, it is true to say enlightened managements, have also been concerned about the fall in the number of trade unions with whom they have to carry on negotiations and which represent various sections of the work force. Unfortunately, some owners and managements have quite different attitudes. Fearing the strength and unity which stems from affiliation to the Trades Union Congress and, in particular, the growth of white collar unionism over recent years, some owners and managements have deliberately fostered, and promoted, staff associations whose ideologies stem from an acceptance of the notion that all within the organisation have a common interest in pursuing the same goals. The


goals, of course, are the goals of management. This whole approach was based upon a myth that maximising profits did not mean minimising costs and, therefore, keeping wages to a minimum. In the real world in which we live the situation is quite different.
It is against that background of industrial relations in Britain today that the certification officer, established by the Employment Protection Act, has had to operate. It becomes increasingly clear that, because of the looseness involved in defining what an independent trade union is within the Trade Union and Labour Relations (Amendment) Act, this is creating situations only one of which time allows me to mention.
The amendment that I am suggesting would improve industrial relations, which is the aim of the Employment Protection Act, by ensuring that the interpretation of Section 1(2) of that Act, which is concerned with promoting the improvement of industrial relations through conciliation, will be related to the examining of decisions by the certification officer where they appear to be contrary to that aim.
It is a matter of regret that a good Act should be marred by the situation which presently exists revealed, in particular, by the certification of Courtaulds Group 1 Staff Association, recently judged as independent. It has no full-time staff, the company provide it with printing, clerical assistance, internal post and telephone facilities. It charges only 30p per month subscription—and I would remind the House that the average subscription for bona fide trade unions is E1 per month. But it saves—and this is quite remarkable—over two-thirds of its income. It does little except hold procedure agreements.
This association can now apply for a closed shop and fairly secure the dismissal of members of the Transport and General Workers Union, the General and Municipal Workers Union, the Amalgamated Union of Engineering Workers and the Association of Scientific, Technical and Managerial Staff. Yet it has been a creature of management. The

only vote open for such unions is the vote of industrial action.
Independence confers the following rights: first, to approach the Advisory, Conciliation and Arbitration Service on a recognition problem; second, to obtain a closed shop; third, to obtain formation for collective bargaining purposes and redundancies; fourth, time off for union officials for education purposes; fifth, safety representatives under the Health and Safety at Work Act; sixth, pension scheme trustees and statutory consultations—and various other rights.
In most of these the staff associations will exercise their rights and sit down with Trade Union Congress-affiliated trade unions, but—and here comes the nub—it is already apparent that they will refuse to do so. The Confederation of Engineering and Shipbuilding Trade Unions has made a declaration that in no circumstances will it sit down with this staff association in this kind of exercise. In the aerospace industry, there are 15 new staff associations seeking recognition. In view of the statement of the Confederation in the context of the Courtauld No. 1 Staff Association, it is imperative that early action be taken to remedy the omission existing within the Employment Protection Act as it stands at present.

Question put and agreed to.

Bill ordered to be brought in by Mr. Stan Thorne, Mr. Ron Thomas, Mr. Doug Hoyle, Miss Jo Richardson, Mr. Russell Kerr, Mr. Tom Litterick, Mr. Brian Sedgemore, Mr. Martin Flannery, Mr. Eddie Loyden, Mr. George Rodgers and Mr. Dennis Skinner.

EMPLOYMENT PROTECTION ACT (AMENDMENT)

Mr. Stan Thorne accordingly presented a Bill to amend the Employment Protection Act 1975: and the same was read the First time; and ordered to be read a Second time upon Friday and to be printed. [Bill 198.]

BUSINESS OF THE HOUSE (FINANCE BILL)

Motion made, and Question proposed,
That the Third Reading of the Finance Bill may be taken immediately after the consideration of the Bill notwithstanding the practice of the House as to the interval between the stages of Bills brought in on Ways and Means Resolutions.—[Mr. Joel Barnett.]

3.55 p.m.

Sir Geoffrey Howe: In view of the way in which this Finance Bill has been handled by the Government, following the disastrous pattern of their management of such legislation in the past, I suggest the House ought to think very carefully before acceding to the motion now before the House. The House will recollect the way in which the Finance Bill last year, which led to the introduction of capital transfer tax, was a pattern or chaos and confusion with quite insufficient time allowed to the House to consider important matters there being laid before it, from which we are only now beginning to recover.
There were 34 clauses on capital transfer tax in the Bill as originally introduced, which grew to 38 on its way through the House, and so disastrous was the Government's management of that legislation that in this Bill we now have no fewer than 49 clauses designed to repair the wreckage of last year's legislative irresponsibility.
The way in which this Bill is being handled bids fair to outbid even that record of confusion. It is a very serious point. We are passing, in the financial field, legislation which affects the rights of hundreds of thousands, often millions, of people closely and directly and on this pattern of performance, this House, let alone people outside, have no effective opportunity whatsoever of considering these important provisions. This flies entirely in the face of the standards that people outside ought to be able to expect of Parliament in its handling of legislation. They believe that we are capable of representing to and forcing upon the Government serious criticisms of detailed legislation of this kind. The Government by their handling of this kind of legislation, have made that literally impossible.
If we look at the extent to which the Government fall short of what is desir-

able, it is worth looking at the report of the Committee presided over by my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) on the preparation of legislation, which reported in May of last year, and the report of which has been debated in both Houses and approved in general by the Government in both Houses. One of the important recommendations in the report is that on all Bills of considerable length or complexity there should be 14 days betwen publication of the Bill, after the Committee or Standing Committee stage, and the start of the Report stage.
This Bill was published last Thursday, and we are being required to debate it on Tuesday, not 14 days but four days after publication. As though that is not bad enough, we find that, although there are eight new clauses tabled by the Government, five of them first appeared on the Order Paper, either on Friday or Monday; and although there are 159 Government amendments, as I count them, no fewer than 146 of them appeared either last Friday or on Monday. Many of the new clauses and amendments deal with matters of vital importance to citizens up and down the country, on which this House should be able to receive advice from citizens and advisers.
My hon. Friends have laboured hard to try to get such advice as they can on these important matters, but it is a total mockery to sugest that this is the right way to consider important fiscal legislation of this kind. In a moment of inadvertent candour, during a late stage of the Committee proceedings upstairs, the Financial Secretary committed himself to some bland, benign observations on his ideal standards for consideration of fiscal legislation. He was quite right. He said that it should be handled by the publication of model clauses in time for people to consider them in advance. He might do better than that and follow the example set by my noble Friend Lord Barber and resort to the publication of Green Papers for discussion inside and outside this House, so that there could be some chance of intelligent consideration of these matters. That is not what happened with this Bill.
We have come to associate the Chief Secretary and the Financial Secretary


with a record of unique incompetence in the handling of these matters. In the introduction at great speed of fiscal proposals which are designed, sometimes intended sometimes not, to do great harm, with quite inadequate time for parliamentary consideration, hon. Members opposite combine a capacity for mismanagement with a capacity for malevolence to a unique extent.
This is only the last example of their pattern of behaviour. If we look at the Bill we find that on many critical matters, out of sheer incompetence, as a result of discussions in Committee stage, the Government have had to concede major changes. They have had to change their share incentive legislation in a fundamental way. They have had to make major changes in the provisions on stock relief. They have had to make major changes in the rules relating to life insurance. They have had to make major changes in their capital transfer tax proposals. They have also had to make fundamental changes, still quite inadequate, in the provisions in Schedule 6—the notorious snoopers' powers clauses—and, worst of all, in Clauses 55 to 67 for the taxation of benefits in kind.
This is a classic demonstration of the way in which the Government set about introducing fiscal legislation. The Chancellor of the Exchequer throws a few malevolent propositions at his hapless junior Ministers culled from some TUC publication, makes some general observations about them in his Budget Speech, may refer to them on Second Reading, and then leaves it to his right hon. and hon. Friends to sort things out as best they can.
The Government have produced a pattern of chaos about which we have been protesting day after day, week after week. Time and again my right hon. Friend the Member for Yeovil (Mr. Peyton) has drawn attention to this important matter. We have had the classic pattern of disorder and retreat in many respects. We tabled a motion for recommittal of Clauses 55 to 67 to a Standing Committee because, in our view, they were in a wholly inadequate condition for sensible debate by this House. They set out to fulfil the general aspirations of envy which the Chancellor contained in his Budget Speech on the basis that a bit of envy would make the rest of his economic

medicine go down—by strengthening the provisions for the taxation of benefits in kind.
As these propositions have emerged from Committee, where the conclusions are clear they are largely unacceptable, and over large areas they are quite obscure. Only one thing seems to stand out as a beacon of clarity in what has emerged from Committee—namely, that, whatever else happens, none of these harsh fiscal provisions designed to affect so adversely skilled workers and middle managers—the people whose skills we need more than ever—should be allowed to affect the rights, privileges, incomes or positions of Cabinet Ministers and Permanent Secretaries. The legislation seems to have been designed to leave inviolate their right to occupy the houses which they occupy in country as well as in town and their right to have access to pool cars, if that is how they are described. It is a curious principle that those who may be allowed to have access to cars without taxation of the benefit are only those who can afford—preferably at the expense of the taxpayer—such cars with chauffeurs.

Mr. Speaker: Order. I am always reluctant to pull up Front Bench spokesmen, but the right hon. and learned Gentleman is going exceptionally wide of the Question that we are discussing. I am prepared to allow a wide discussion, but not the details of the Finance Bill.

Sir G. Howe: I appreciate that, Mr. Speaker, but this is an important point. We are being required to consider on Report the provisions of a Bill published only four days ago. The motion now before the House is that we should add to that and proceed straight to Third Reading. My argument is that the legislation has been so badly mishandled in this and many other respects that this timetable is unacceptable.
Looking at the mysteries still before the House, the fact is that miners, but nobody else, are entitled to receive the benefit of free coal without liability to taxation. Railway and airport workers are brought into the legislation and let out of it. Commercial travellers are brought into the legislation and apparently half let out of it. The position of lorry drivers is already being considered by some committee away from this House. The position of seamen is


also being considered by a committee away from this House. There are many other categories about whose position we can have no certainty. It is unacceptable that this kind of legislation should be brought before the House on Report with so many uncertainties. Therefore, we should consider whether the Government should be allowed to proceed from Report to Third Reading on the time table proposed.
The Government have made more of a mess of this part of the Bill than of the rest of it. Committees miles away from this House are looking at the wholly unresolved mysteries of representative occupation. Are miners to be entitled to occupy their homes free of any tax charge? Are they in a better or a worse position than Cabinet Ministers? Are sailors to be entitled to take their wives to meet them when they are at overseas stations without being taxed? Are lorry drivers to be penalised?
On all these matters the legislation, as my hon. Friend the Member for Guildford (Mr. Howell) said in Committee, is now in a literally liquid condition. We are having thrown at us a mass of general propositions about which the Ministers in charge of the Bill are unable to state their intentions, let alone what the Bill is intended to or does mean. This is no way in which to handle important fiscal legislation of this kind.

Mr. Arthur Lewis: I am obliged to the right hon. and learned Gentleman for giving way. I know that he is is fair and honest. I agree with much of what he said. But inadvertently, when rightly referring to whether miners and others may or may not receive their perks, he left out that the Government have already decided that ex-Prime Ministers may still have the benefit of a tax-free car worth £10,600 per year and are to be allowed to keep it.

Sir G. Howe: The hon. Gentleman raises a matter that was raised in Committee. One of my hon. Friends put that question, to which we have had no answer.

Mr. Arthur Lewis: I have had an answer to the question. It is to be allowed.

Sir G. Howe: I have seen the Written Answer given to the hon. Gentleman. We have not yet had an answer regarding the intention of this legislation.

Mr. Arthur Lewis: I shall not be voting for it either.

Sir G. Howe: That is another good illustration of the chaotic condition of the Bill. I ask my right hon. and hon. Friends to consider seriously whether this is the way in which to make major changes of this kind when the Government are grappling with substantial economic difficulties. This bundle of malevolence, designed to clobber a small minority of those whom they think benefit from perks, now turns out to clobber a large number of people who have made powerful representations to the Government. Therefore, the Government are retreating in disorder in all directions and are producing a monster of hybridity by making promises and concessions to one group after another and withdrawing one subsection after another so that nothing of principle remains. No one will know where he stands. This House will have no idea of what it is being asked to approve on Report, let alone if it allowed the matter to proceed to Third Reading as the motion suggests.

4.8 p.m.

Mr. Nigel Lawson: I wholly support everything said by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe). Had he served on the Standing Committee upstairs and, night after night, seen the Government's incompetence in the handling of this Bill, I do not think that he would have spoken in the moderate tones that he used.
You will be aware, Mr. Speaker, that there are 260 amendments on the Notice Paper, of which 159 are Government amendments. The reason why there are relatively few Opposition amendments is that we have not had time to submit these many Government amendments to the scrutiny that is proper and necessary. I ask you to address your mind particularly to New Clause 24 which the Government tabled only yesterday. You may understand this matter clearly, Mr. Speaker, but it is complicated for most of us. This is of importance to the nationalisation of aircraft and shipbuilding companies, because it concerns


whether the compensation is fair. This is a major matter for the whole House to decide. The new clause was tabled only yesterday. Therefore, it has been impossible for it to be given proper consideration.
My right hon. and learned Friend suggested that there should be a recommittal of the clauses regarding the taxation of benefits in kind. Indeed, upstairs the Financial Secretary suggested that these should be taken out and submitted as draft clauses, because they do not come into force until 1977–78. That is a practical proposition, for it would give us more time to discuss other clauses.
The Finance Bill is special not only because of its importance but because, unlike other legislation, there is no opportunity for amendments to be made in the other place. Therefore, as this is the final consideration that is possible for the Bill, we must be doubly or trebly sure that we get it right. But it is impossible, when the Government have got it all wrong and have made so many mistakes, for us to get it right and to put it right in the short time that is available to us for the tabling of amendments and new clauses and consideration on Report.
This is a scandalous way to treat the House and the taxpayer who is intimately affected by everything in the Bill. Even if the Government will not at this late stage change their business arrangements for dealing with this Bill, I feel that we must have an assurance that we shall not have to go through this sort of nonsense—it is worse than nonsense—again. It is quite impossible. It makes a mockery of this House and the whole of Parliament.

4.10 p.m.

Mr. Michael Latham: I support my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) and my hon. Friend the Member for Blaby (Mr. Lawson). We are now discussing the most important rôle of Parliament, which is the voting of supply and the taxation of our citizens. No rôle is more important than that. If that is not done with adequate time and proper consideration we shall bring democracy into total disrepute. One of our purposes is to control the Executive, especially in

the granting of supply and the taxation of citizens.
I shall say something that will be of concern to the Minister of State. I shall say something nice about him. That Minister ordered these matters better. We have just completed a taxation Bill. The Development Land Tax Bill was completed last night. The Minister of State handled that differently from the way in which other Treasury Ministers have handled the Finance Bill. On Report the Minister of State followed the procedure described by my right hon. and learned Friend. He produced Government new clauses at the last moment. He put them on the Order Paper and moved them. He heard the discussion in the House, during which great holes were ripped in the new clauses, as they had not been adequately thought through, and withdrew them. He said that the House had not properly discussed the clauses and that they should be thought out again. That is the way in which Parliament should operate—rather than the farcical procedure that we are likely to experience in the next few days. It is proposed that we shall discuss clauses which cannot possibly have been considered by outside interests.
My right hon. and learned and hon. Friends referred to the difficult discussions that took place in Committee. That is important. Some hon. Members have lived with the Bill. But what about those who were not members of the Committee? We may read the discussions in the Official Report. That is simple enough. But to follow the method by which the debate evolved and to sample the flavour of it is difficult if an hon. Member has not had adequate time in which to consider the amendments carefully and properly.
It is no good the Government brushing that aside and saying that it happened in the past. It is time that the practice was stopped and that the Opposition made a stand.

4.12 p.m.

Mr. J. Grimond: I support the protest made by the Opposition Front Bench at the conduct of Government business. Let us first consider the general conduct of business. For instance, take my position. I spent all


this morning in Committee on the Energy Bill [Lords]. I was supposed to be attending the Scottish Grand Committee as a Scottish Member of Parliament at the same time. I must return to the Energy Bill [Lords] Committee at 4.30 p.m. while this Bill is considered in the House, together with the many amendments which no one has seen in the past day or two. That makes a complete shambles of the work of the House of Commons. This is the second year that this has occurred.
The Government extracted the vital clause from the Energy Bill [Lords] and replaced it with five new clauses after the Bill had been through the House of Lords and received a Second Reading in this Chamber. The same practice is being followed with this legislation. The Finance Bill is traditionally a matter which vitally affects everyone in the country, but the majority of Members of Parliament have no opportunity to consider it. They have little opportunity to take part in the debate.
I should like to refer to the matter touched on by the right hon. and learned Member for Surrey, East (Sir G. Howe) concerning the taxation, or otherwise, of perks. This is one of the most monstrous pieces of mishandling that has ever occurred in the history of Parliament. We must go back to the eighteenth century to see anything like it. The Government proposes to exempt themselves and their civil servants from the impact of this tax. Now, when they find that those who support them, and must pay, object to it, they are prepared to alter the basis of the proposal.
The hon. Member for Newham, North-West (Mr. Lewis) drew attention to the fact—I take his word for it as I have not checked the fact—that an ex-Prime Minister is to get a free car, free of tax.

Mr. Arthur Lewis: I shall explain. Two ex-Prime Ministers are each receiving a car, including tax, insurance, petrol, cleaning and garaging, worth £10,600 a year. Only two ex-Prime Ministers are drawing that. This happened only recently. Former Prime Ministers receive that. When I raised the matter it was said that that was done for security reasons. If that is so, what about ex-Secretaries of State for Northern Ireland, the Home Office and Defence? Any ex-

Minister might claim the benefit on the same ground. In my opinion a crooked thing has been done.

Mr. Grimond: I am not in a position to check what the hon. Gentleman said. I take it that what he said is true. If so, that seems a most extraordinary arrangement, to say the least. What is so serious about it—

Mr. Nicholas Fairbairn: Mr. Nicholas Fairbairn (Kinross and West Perthshire) rose—

Mr. Grimond: I shall give way in a moment. First I wish to comment on what the hon. Member for Newham, North-West said. I take the hon. Gentleman's word for it. If the position is as he described it, it is a most extraordinary arrangement. Added to what went on before, it makes the conduct of Government even odder. At the least the matter should be given adequate consideration by Parliament. There should be a statement about it by the Government. I understand that that has not happened.

Mr. Fairbairn: If I may add to the enlightenment afforded by what the hon. Member for Newham, North-West (Mr. Lewis) said, I have checked up on this matter. Not only are two ex-Prime Ministers drawing this benefit, but only two ex-Prime Ministers were even offered it.

Mr. Grimond: That seems stranger still. If ex-Prime Ministers receive this, it should apply to them all as a class.
The habit of legislating for groups of people has been fought by Parliament throughout most of its history. It must continue that fight today. It should fight especially against the chaotic method in which such measures as these are introduced. These matters are being considered, so I am given to understand, by people who are not subject to parliamentary control or to Questions in this House.
The motive for the measure is that it will please the supporters of the Government. There is no other motive. If this were a general impost upon all who had perks I would have some sympathy for it, although I do not say that I should support it. However, it should apply to the cars of Ministers, civil servants and everyone else. It may be arguable that ex-Prime Ministers should benefit, but it should apply to all ex-Prime Ministers and those in a similar position.
This ad hoc legislation damages the country. It means that every group is now out to press its demands to the utmost. The general interest is forgotten. The Government no longer fulfil their main function—which is not to be a servant or mouthpiece of certain interests in the country, but to enforce the general interest of the people against those who simply want to obtain what they can from the Government. If the Government have good reasons for these proposals, they should have been fully explained to the House. The proposals should not be decided by bodies which are not subject to examination by the House. Above all they should not be brought forward at a time in the Session when there is no conceivable opportunity for a proper examination.

4.18 p.m.

Mr. Douglas Crawford: I should like to add my agreement to what was said by the right hon. and learned Member for Surrey, East (Sir G. Howe), the hon. Member for Melton (Mr. Latham), the hon. Member for Blaby (Mr. Lawson) and the right hon. Member for Orkney and Shetland (Mr. Grimond).
I shall not go into the details of whether ex-Prime Ministers should have tax-free cars. However, the Treasury Bench has indulged in a disgraceful and flagrant abuse of Back-Bench time. As a member of a minority party with little financial back-up, I say that the Scottish National Party are grateful for such backup as we have received. I speak as an ex-member of the Finance Bill Committee. It was difficult to wade through the piles of new clauses and amendments put down by the Treasury Bench.
I think that last year we went through the Bill on Report seriatim. We did not just take the new clauses to start with. We went through the Bill from beginning to end. I think I am right in saying that we took the new clauses in their logical position in the Bill.
If the Opposition do not force this matter to a vote, my party certainly will.

4.20 p.m.

Mr. F. P. Crowder (Ruislip-Northwood): It seems to me that the Leader of the House might have had the grace to attend a debate on a matter of

this importance. He seems to treat the House of Commons like a railway station. He never comes here. He never takes any interest in our debates or matters of this sort, which are of the greatest importance. Why on earth cannot he attend? I think it is utterly disgraceful that the Leader of the House does not take any part or any interest in these proceedings.

4.20 p.m.

Mr. Barney Hayhoe: It is monstrous that a motion of this kind should be proposed by the Government. We have not yet had a ministerial speech in support of it. The Government are treating the House with contempt.
Ministers are not even prepared to argue the case for treating this House as a sausage machine for rolling legislation through as it suits them. It is totally wrong. Ministers should produce reasons why the normal practices of the House should not be followed, instead of our having to object to the motion before we can get an explanation from the Government. I wish to register my strong protest at the way in which Ministers on this occasion, as on many others, have treated this place with arrogance and contempt.
Government Back Benchers who, from time to time, express a belief in this place and in the procedures of Parliament, should not lie back and be walked over by Ministers in hobnail boots who are treating this place with contempt.

4.21 p.m.

The Chief Secretary to the Treasury (Mr. Joel Barnett): I have left my hobnailed boots behind. [Interruption.] Do not threaten me. Do not be so silly.

Mr. John Peyton: On a point of order, Mr. Deputy Speaker. Ministers are not conducting themselves particularly well on this Bill anyway, but if they are to say "Do not be silly" as soon as they rise to make a speech they ought to know that they are addressing the Chair. I hope that you will remind Ministers that they are expected to observe the courtesies and rules of the House.

Mr. Barnett: I was telling Opposition Members not to be so absurd.
There is a serious case for re-examining the way in which we handle our legislation, but a debate such as that we have just had is not the best way of doing it. I should be happy to take part in serious discussion of this subject, but we should not simply say that one piece of legislation has been well or badly handled.
The Opposition complain about this Bill, but let them remember the 1972 Finance Bill. It was larger than this one, consisting as it did of 228 pages, and there were just four days between its publication and the Report stage.
I have heard my hon. Friend the Member for Newham, North-West (Mr. Lewis) talk nonsense too often, and I was sorry that the right hon. Member for Orkney and Shetland (Mr. Grimond) took his remarks at their face value.

Mr. Arthur Lewis: I have often heard my right hon. Friend talk nonsense as well.

Mr. Deputy Speaker: Order. The hon. Member must be courteous to the Minister.

Mr. Barnett: We have had a debate on perks, and I shall say something more on this subject later.

Mr. F. P. Crowder: Does not the right hon. Gentleman agree that the Leader of the House should be here for a matter of this importance? We must sort out a sensible way of handling these difficulties. It is not the responsibility of the Chief Secretary. Why is the Leader of the House not here?

Mr. Barnett: I thought we were debating the Finance Bill. [Hon. Members: "No."] We are debating a motion that the Third Reading of the Bill
may be taken immediately after the consideration of the Bill notwithstanding the practice of the House as to the interval between the stages of Bills brought in on Ways and Means Resolution.
The hon. Member for Brentford and Isleworth (Mr. Hayhoe) asked why Ministers were not following the normal practices of the House, but this is the normal practice. This is the way we have handled our affairs for years. What is different about this year is that the right hon. and learned Member for Surrey, East (Sir G. Howe) has sought to make what I hope

is a serious point about the need to reexamine the way in which we handle our legislation. There is a serious case for re-examining the way in which the 1972 Finance Bill, other Finance Bills and other general legislation have been handled.

Mr. George Cunningham: My right hon. Friend may not be aware that the new Procedure Committee of the House decided yesterday to embark upon an examination of the way in which legislation is conducted. The right hon. Member for Yeovil (Mr. Peyton) may not know that because, although he is a member of the Committee, he was not present yesterday.

Mr. A. P. Costain: On a point of order, Mr. Deputy Speaker. Is it in order for an hon. Member to report the findings of a Committee to the House?

Mr. Speaker: In fact, no.

Mr. Barnett: I thought that my hon. Friend the member for Islington, South and Finsbury (Mr. Cunningham) was intervening to acquaint me with the situation regarding the Procedure Committee. I thought that what he said would be helpful to the House. I am surprised that hon. Members should think it was not of assistance, whether it was in order or not. I thought we were having a serious discussion on the way in which we should handle legislation. My hon. Friend indicated that this was now being considered. I should have thought that his intervention would be welcomed by the House. It was welcome to me.
Because of the open-ended nature of our discussions in Committee, both parties when in Opposition tend to take a considerable time—I am not complaining about this—in discussing certain items, with the result that many hours can be spent on very narrow points, leaving inadequate time for the discussion of later parts of the Bill. That invariably happens and it is not very sensible. There is a better way, but I do not think that the contributions we have just heard offer the best way of changing our procedure. The best way is to have a sensible, serious, quiet discussion in the Procedure Committee.
It is nonsense to suggest that we have had inadequate discussion of the Bill

Mr. Lawson: Is the right hon. Gentleman suggesting that the Committee stage of the Bill was too long and should have been curtailed? If so, that is a serious and disgraceful suggestion. It appeared to be the burden of his remarks. Is he not aware that we are concerned not with the question of inadequate discussion upstairs but of inadequate discussion of what the Government have tabled subsequently?

Mr. Barnett: I did not say what the hon. Gentleman suggests I said. I had hoped he was listening. I should be happy to spend long hours of the day and night in Committee if the House had adequate time to debate legislation. It would be sensible to find adequate time to debate every clause in a Bill, but one of the problems of our method of handling legislation is that in considering a Bill of 100 or more clauses we take a lot of time over a few causes and then have to rush through the remainder.

Mr. Norman Lamont: Is not this Bill very different from previous Bills, because the Financial Secretary made clear that the clauses dealing with fringe benefits were only provisional? He said that he would not reply in detail to all the points raised on that subject because the Government would be coming back with recommendations at Report stage which would be different from what was originally proposed.

Mr. Barnett: That is a travesty of what my hon. Friend said in Committee. I shall be coming to that point and some others.

Mr. Fairbairn: The Minister of State, Treasury recognised with the Development Land Tax Bill that one of the difficulties with financial Bills was that, if new clauses or amendments were found to be right in principle but wrong in detail, nothing could be done if there was no time between Report stage and Third Reading. We cannot remedy the matter if our business is conducted in this way. We are deprived of the opportunity of discussing matters sensibly.

Mr. Barnett: I was talking about trying to bring about a better way to examine our legislation and to deal with precisely that point. Faults lie with Governments of both parties and with

both parties when in Opposition. We do not handle our affairs well. There is a serious problem, but it does not help when the right hon. and learned Gentle. man produces a series of headline-hunting phrases. I know what he is seeking to do. He has to make party poiltical capital out of the situation, but it is not a party political matter. [Interruption.] If the right hon. Member for Yeovil (Mr. Peyton) had heard what his right hon. and learned Friend said, he would realise that it was put in a very partisan way. [Interruption.] I am always ready to take advice from the hon. Member for Blaby (Mr. Lawson) on what is and is not partisan. The right hon. and learned Gentleman was being partisan, and that is not the best way to discuss how to handle our legislation. I hope that I am dealing with the matter in a non-partisan way.
The time allowed for Clauses 55 to 67 was far from inadequate. There was the whole of one sitting and the greater part of two other sittings, and on two of the clauses two of the sittings went on until 4 o'clock in the morning. I doubt whether any of us would consider that sitting until 4 o'clock in the morning was necessarily the best way to give scrutiny to serious legislation.

Mr. John Nott (St. Ives): Our points on the fringe benefits clauses are that amendments of major consequence, such as those affecting the motor industry, were not known to us until Friday. Most of us had to plough through major amendments in handwritten form over the weekend. That is the precedent established by the Bill. It has nothing to do with 1972. There was never an occasion then when we had to deal with the Government's amendments in this disreputable and disorganised way.

Mr. Barnett: The only information that the hon. Gentleman did not have was what kind of new scale there should be for assessing private car benefit and the break points. He knew that that was the main problem. We had a serious discussion about this matter. The motor industry has made serious representations to the Opposition, so its scales have been known and its break points have been suggested. There is a mass of information available to the Opposition about what kind of amendments they should table to the schedule.
It is a travesty of the truth to suggest that there is a shortage of information. In addition to the time for debate upstairs on the clauses, there was the question of Clauses 57 and 58, now Clauses 61 and 62, and Schedule 8. To try to be helpful to the Opposition, I agreed—because we were proposing significant changes—that we should defer discussion of those clauses. I wanted proper scrutiny, and tried to be reasonable.
We spent 23 hours and 32 minutes in Committee on the Floor of the House and 84 hours and 26 minutes upstairs. We could have spent double that time, and some of the time could still have been more usefully spent debating other parts of the Bill. That applies to all legislation.

Mr. David Howell: I do not think that the right hon. Gentleman has quite got the point. I know that the Government's mind is on other matters, but the point is that which was made by my hon. Friend the Member for St. Ives (Mr. Nott), that since the Bill came out of Committee last week major changes have been made, not only for cars but in regard to loans for employees of banks and other companies, changes about which we have read in the newspapers. These matters need careful examination, because they involve tens of thousands of people and their interests. It is only right that those outside the House as well as those inside should have proper time for study.
The Government have bitten off far more than they can chew. They have created chaos and Bedlam out of the situation. It would be better if the right hon. Gentleman admitted his difficulties. He might find more sympathy from the House, which understands that he is not a bad guy, although his masters have once again led him up a cul-de-sac.

Mr. Barnett: My masters are good guys, and so am I. [Interruption.] The right hon. Member for Yeovil is not as good a guy. At present he is being a very bad guy, but that is normal.
I entirely disagree with the hon. Member for Guildford (Mr. Howell). This legislation has been properly discussed in Committee upstairs. There will now be time to discuss it on Report if hon. Members want to do so. I should

prefer to have much more time to debate all legislation. It might be better if we had until the end of the third week in August to debate this. That might be more convenient to the House, but I am happy to say that that is not a matter for me.

Mr. Grimond: The matter has nothing to do with the Select Committee on Procedure. It is nothing to do with giving time for more discussion in Committee, although that may be necessary. The Government are trying to push through the House far too much legislation which they have not thought out and which is very badly drafted. Not only this Bill but every Bill—it has nothing to do with the right hon. Gentleman, whom I exonerate—is turned upside down by the Government and new amendments are introduced at the last moment at the end of July.
I apologise to the right hon. Gentleman, because I have to go to the Energy Committee. Before I leave, I tell him that since I have bene in the House no Government of any party have got into a muddle such as this Government have done.

Mr. Barnett: I hope that the right hon. Gentleman will acquit me of any discourtesy if I do not discuss every piece of legislation that is going through the House. It might be out of order for me to do so. One of my hon. Friends hit the nail on the head in an intervention. Legislation has been steamrollered through the House with inadequate consideration of the serious arguments advanced by both sides of the House. On this occasion we have given serious consideration to all the speeches made in Committee. To complain that we have taken note of the serious points made and have decided to put down amendments to deal with them seems strange if the Opposition believe that they were talking sound sense upstairs. Where we think that they were on a good point, we have said "We shall consider that and bring forward amendments on Report if necessary." That is precisely what we have done. I do not believe that to be cause for complaint.
We have tabled many amendments which Conservative Members say they do not understand. Many of them are amendments for which they asked. They


were very well advised, as they are on all these matters. They have not had time to discuss the amendments as much as they would like with their advisers. They should understand that most of the amendments are broadly in line with what they requested. It is a simple matter. They have had most of the weekend to look at the amendments. I am surprised at their being so concerned. I hope that when we get down to the debate on Report we shall have serious discussions of the amendments on the concessions.

Mr. Fairbairn: If the Government got it wrong the first time and if they get it wrong again, what remedy does the House have? We cannot correct it if Third Reading follows immediately after Report stage.

Mr. Barnett: There is nothing terribly new in that. We have lived with this situation for a long time, particularly in relation to Finance Bills. Once we finish the Report stage, the other place cannot amend a Finance Bill. This creates problems if we cannot get it right on Report. In 1972, however, on a much bigger Finance Bill we had a similar problem and hon. Members opposite did not complain in the way they are complaining today.

Mr. Lawson: Instead of trying to play party politics, would not the Chief Secretary admit that the Government produced botched-up legislation in the first place? They promised to make corrections to the Bill on Report. The Chief Secretary then has the arrogance to say, in his magnanimity, that he has produced amendments on Report. There are four and a half to five pages of amendments on the benefits-in-kind clauses alone. As he botched it up the first time, it is likely that he may have done so the second time. The situation is simply not good enough.

Mr. Barnett: It is not a case of the Bill being botched up, because the amendments very often were botched up. I am not complaining about that. I understand the problems of Back Benchers. They do not have drafting facilities, and many of their amendments are not properly drafted. We have now put down amendments with the advice of parliamentary counsel, and I hope that these amendments will be acceptable to the

House, if we ever get round to discussing them.

Mr. Tony Newton: There is really a much more serious point here. It is not simply a question of whether amendments have been botched up or arguments of that kind. In the next five or six days we are proposing to pass a Bill which will have substantial effects on employment in the British motor industry but which in its original form would have bankrupted a number of citizens, and it will have major effects on the affairs of individuals. It is right and proper that Parliament should have time to consider and discuss with outside interests all the implications of the Government's proposals before they go through. We have not had time to do this.
It does not require a Procedure Committee to tell us that it is wrong to publish a Bill on Thursday, put down a host of major amendments on Friday and Monday, and expect the House to discuss that business on Tuesday with a view to passing it the following Monday. That is not the way to intervene in the affairs of citizens.

Mr. Barnett: I concede at the outset that the way in which we discuss our legislation generally in this House leaves a lot to be desired. Of course, I would have liked a lot more time. [Interruption.] With the greatest respect to the Opposition, the amount of time allocated to this Bill is just as great as the amount customarily allocated to Finance Bills.

Mr. Peyton: The point that the Chief Secretary continues to miss is that when the Government make errors in their legislation, which they do frequently, and when their business is in disarray, as it is now, it is not good enough for a Treasury Minister to come here and say that the Government's good intentions to put things right must be taken as an achievement. They are by no means justified in making that claim.
In answering points put by my hon. Friends, the Chief Secretary has repeatedly said that it is not within his power to make observations or give undertakings about the way in which the business of the House should be handled. Of course he is justified in saying that, but as he is obliged to rely on that defence he should


carry matters to their logical conclusion and send a message to the Leader of the House, who is responsible for the handling of business. He is responsible for the quite disgraceful disarray of the business of the House of Commons. As the right hon. Member for Orkney and Shetland (Mr. Grimond) said before he left the Chamber, in all his years in this House he has never seen Government business handled with such total incompetence, resulting in the mess which we have today. The Chief Secretary should send that message to the Leader of the House, pointing out that this is his motion and, therefore, he should handle it.

Mr. Barnett: I never suggested that the amendments themselves were sufficient. There would have to be adequate debate on them. At the moment we are debating whether there is adequate time to discuss the Report stage and whether the Third Reading should come immediately after it.
As far as other business is concerned, no doubt the right hon. Member for Yeovil will have ample opportunity to raise the matter with the Leader of the House himself. At the moment, we are dealing with the question of whether there is adequate time to debate the Finance Bill at Report stage, and the longer we take on procedural motions of this kind the less time there will be for that debate.
In my view, if we proceed sensibly on Report there will be ample time to discuss all the new clauses and amendments. If the hon. Gentlemen are suggesting that there is here something new which has never happened before on a Finance Bill, they have not examined the way in which we have handled our Finance Bills or our other legislation over many years. I have never denied that there is good reason to examine the way in which we handle our affairs, but I stress that this is not the way to change the handling of our legislation.

Mr. Lawson: The Chief Secretary has told the House that there will be a perfectly adequate amount of time for us to discuss the Bill. If the House goes on after midnight on each of the three nights, it will mean that we spend less than 10 minutes on each Government new clause

or amendment, even if no Opposition amendments are debated at all. The Finance Bill does not have to receive Royal Assent until 6th August, so why is the right hon. Member rushing the House wholly unnecessarily?

Mr. Barnett: The last thing in the world that I would wish to do is to rush the hon. Member for Blaby. I hope that we will get through Report stage and Third Reading in the time allocated. We should be able to make it. There is a question of how much time can be allocated to one measure in a parliamentary Session. The House knows that it is difficult to get through legislation because the parliamentary timetable is very limited indeed, but with three days this week and half a day next week, given the enormous amount of time we had in Committee, we should find that we have more than an adequate amount of time. We should proceed now with the debate on the Bill by passing the motion before us.

5.3 p.m.

Sir Geoffrey Howe: The Chief Secretary has not done justice to the case put to him—or to his own flashes of understanding of it. Of course there is agreement in many parts of the House about the inadequacies of the parliamentary machinery for handling legislation. That is why under the last Government a Committee was set up under the chairmanship of my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) to consider these matters, and it made recommendations which this Government accepted. One of those recommendations was that there should be a sufficient interval between publication of a Bill of this kind and its discussion on Report.
The Chief Secretary has entirely missed the point. It is not a question of how much time we have from now on to discuss these things, but how much time we have had to consider the Bill since it was published and how much to consider the amendments tabled by the Government on Friday and Monday. Does the Chief Secretary suggest that there has been time to consider in detail the provisions relating to compensation for shipbuilding nationalisation? I hope that the Chief Secretary will pay attention to this. Does he believe that there has been time properly to consider those proposals?
As to the provisions for the taxation of motor cars as benefits in kind, the Chief Secretary produced a schedule in the Bill as published which was apparently the result of three years of consideration by the Tax Reform Committee, years of consideration by the Inland Revenue, and months of consideration by this Government. It is now clear that that schedule was totally and wholly wrong and likely to do grave damage to the motor industry and to people who have to use cars as tools of their trade.
Why on earth should we be expected to believe that the schedule now produced at 24 or 48 hours' notice is any more likely to be correct than the one admitted to be botched? At least we are entitled to have time in which to consider it and to know why the Chief Secretary has not tabled amendments on the points that he undertook to consider. It is a question not of time for debate but time between the publication of a Bill and the tabling of amendments and the commencement of debate.
The truth is that not one of these provisions will make a jot or tittle of difference to the Government's economic policy. Their only consequence is likely to be inadvertent, blind damage to people who do not happen to belong to interest groups and, having been hit by this casual legislation, have not been able to put sufficient pressure on the Government since this rubbish was first published. There is no urgency about this sort of provision. It can be taken back and considered next year, if the Government last that long and remain committed to this folly.
The worst aspect was illustrated by the comment by the former Leader of the Liberal Party about the way in which Ministers' benefits and perks survive like a beacon of clarity in the midst of this shambles of legislative change. They go sailing straight on, and the intention is that not a finger should be laid on the non-taxable occupation of ministerial houses and the use of ministerial so-called pool cars. Citizens outside this House are struck by the fact that these islands

of exemption remain while they themselves are hit by random legislation of the most venomous kind. They must feel that this is no way to pass important tax legislation.
The Chief Secretary may complain as much as he likes, and I agree with him about the inadequacy of the machinery for considering fiscal legislation. Our case is that the Chief Secretary and his colleague, the Financial Secretary, have set out, deliberately or otherwise, to test that machine to destruction. They have destroyed the faith of hon. Members and people outside the House by this package of fiscal legislation. The sooner they recognise it, the better.
I invite my hon. Friends to join me in the Lobby in voting against this motion.

Mr. F. P. Crowder: I am a little worried about the casual disregard of these matters shown by the Leader of the House. Twenty minutes ago I asked for his attendance. He has not yet appeared. He seems to think that he can ride roughshod over the House of Commons. It will not do. I should like to hear my right hon. and learned Friend's comments on that.

Sir G. Howe: My hon. and learned Friend has raised an important point. The Leader of the House, on this as on so many other pieces of legislation, is treating the House with contempt. The great champion of parliamentary rights has disappeared in a cloud of smoke and has become one of the most disreputable representatives of the Government we have seen in this House. I ask the House to ensure that the motion before it is defeated, as it ought to be.

Question put:—

The House divided: Ayes 223, Noes 197.

[For Division List No. 240 see col. 609]

Question accordingy agreed to.

Ordered,
That the Third Reading of the Finance Bill may be taken immediately after the consideration of the Bill notwithstanding the practice of the House as to the interval between the stages of Bills brought in on Ways and Means Resolutions.

WAYS AND MEANS

RESTRICTION OF RELIEF FOR PAYMENTS OF INTEREST (INCOME TAX AND CORPORATION TAX)

Resolved,
That provision may he made for restricting relief in respect of payments of interest made after 8th June 1976 and in certain cases on or before that date—[Mr. Joel Barnett.]

CHILD BENEFIT (INCOME TAX)

Resolved,
That provision may be made for applying in relation to child benefit the provisions of sections 24(1) and 219(1)(b) of the Income and Corporation Taxes Act 1970.—[Mr. Joel Barnett.]

Orders of the Day — FINANCE BILL

Not amended (in the Committee) and as amended (in the Standing Committee), considered.

Mr. Deputy Speaker (Mr. Oscar Murton): Mr. Speaker desires me to say that he has not accepted the Opposition motion for recommittal in respect of Clauses 55 to 67 and Schedules 7 and 8.

Ordered,
That the Finance Bill, as amended, be considered in the following order, namely, new Clauses, Amendments relating to Clause 1, Schedules I and 2, Clause 2, Schedule 3, Clauses 3 to 32. Schedule 4, Clauses 33 to 35, Schedule 5, Clauses 36 to 52, Schedule 6, Clauses 53 to 59. Schedule 7, Clauses 60 and 61, Schedule 8, Clauses 62 to 67, Schedule 9, Clause 68. Schedule 10, Clauses 69 and 70, Schedule II, Clauses 71 to 92, Schedule 12, Clauses 93 and 94, Schedule 13, Clauses 95 to 105, Schedule 14, Clauses 106 to 123, new Schedules, and Amendments relating to Schedule 15.—[Mr. Joel Barnett.]

New Clause 7

CAPITAL TRANSFER TAX IN RELATION TO LEGITIM

'.—(1) Where a testator dies leaving a surviving spouse and a person under the age of 18 entitled to claim legitim, and provision is made in his will or other testamentary document for a disposition to his spouse which, if it could take effect, would leave insufficient property in the estate to satisfy the entitlement of that person in respect of legitim, the following provisions of this section shall apply.

(2) Subject to subsections (3) and (4) below, tax shall be charged at the testator's death as if the disposition to the spouse did not include any amount in respect of legitim, but if within the period mentioned in subsection (8) below the person or persons concerned renounce their claim to legitim, tax shall be repaid to the estate calculated on the basis that the disposition to the spouse did include the amount renounced, and the tax to be repaid shall carry interest at the rate for the time being set out in paragraph 19(1)(c)(i) of Schedule 4 to the Finance Act 1975 from the date on which the tax was paid.

(3) The executors or judicial factor of the testator may, in accordance with the provisions of this section, elect that subsection (2) above shall not apply but that subsection (4) below shall apply.

(4) Tax shall be charged at the testator's death as if the disposition to the spouse had taken effect, but where the person or persons concerned claim legitim within the period mentioned in subsection (8) below, tax shall be


charged on the amount so claimed calculated on the basis that the legitim fund had been paid out in full at the testator's death and the tax chargeable thereon had been apportioned rateably among the persons entitled to claim legitim and the amount of tax charged shall carry interest at the rate mentioned in subsection (2) above as if paragraph 19(1)(b) of Schedule 4 to the Finance Act 1975 had applied.

(5) Section 8(3) and (4) of the Finance Act 1894 and section 25(5)(a) of the Finance Act 1975 shall not apply in relation to tax charged by virtue of subsection (4) above but the person liable in respect of that tax shall be the person who claims legitim and any person mentioned in section 25(5)(c) of that Act, and section 27(1) of that Act shall apply in relation to the person who claims legitim as it applies in relation to the personal representatives of a deceased person.

(6) Where within the period mentioned in subsection (8) below a person renounces his claim to legitim, that shall not be a transfer of value.

(7) Where the executors or judicial factor of the testator decide to make an election under subsection (3) above they shall give notice in writing of that election to the Board within two years from the date of death of the testator or such longer period as the Board may permit.

(8) For the purposes of subsections (2) and (4) above, a person shall be treated as having claimed legitim unless he has renounced his claim before attaining the age of 18 or he renounces his claim within two years of his attaining that age or such longer period as the Board may permit.

(9) Where a person dies before attaining the age of 18 or before making a renunciation under subsection (8) above the provisions of this section shall apply in relation to that person's executors or judicial factor as they would have applied in relation to that person if that person had attained the age of 18 with the substitution of the date of death of that person for the date on which a person attained that age, but where the executors or factor renounce a claim to legitim in respect of a person the amount renounced shall not be treated as part of that person's estate.

(10) Where subsection (2) above applies in relation to any estate, then notwithstanding anything in paragraph 24 of Schedule 4 to the Finance Act 1975 the Board may repay tax under that subsection without limit of time.

(11) Where subsection (4) above applies in relation to any estate, then notwithstanding anything in section 11 of the Finance Act 1894 or paragraph 25 of Schedule 4 to the Finance Act 1975 a certificate of discharge may be given under the said section 11 or the said paragraph 25 in respect of the whole estate, and notwithstanding anything in section 8(7) of the Finance Act 1894 or paragraph 23 of Schedule 4 to the Finance Act 1975 the giving of the certificate shall not preclude the Board from claiming tax under subsection (4) above without limit of time.

(12) In the case of a testator who died before 13th March 1975, any reference in

this section to tax includes a reference to estate duty.

(13) This section has effect in relation to the estate of any testator who died after 12th November 1974 and extends to Scotland only'.—[Mr. Denzil Davies.]

Brought up, and read the First time.

5.8 p.m.

The Minister of State, Treasury (Mr. Denzil Davies): I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: It will be convenient to discuss also the following amendments to the new clause:
Amendment (a), in subsection (4) after second 'death', insert
'(excluding that part of the fund renounced before any claim has been made)'.
Amendment (b), in subsection 4 after third 'legitim', insert
'(excluding any who have renounced as aforesaid)'.

Mr. F. P. Crowder (Ruislip-Northwood): On a point of order, Mr. Deputy Speaker. I apologise to the House for having criticised the Leader of the House for not being present during the previous debate. I now understand that it was no fault of his. I therefore withdraw my criticism and my strictures. I understand that he was engaged in a parliamentary Committee. I am sorry if I have been unfair to the right hon. Gentleman.

Mr. Davies: The new clause provides special capital transfer tax rules necessary to deal with the treatment of the right of minor children to claim legitim on the death of a parent under Scottish law. This is a peculiarly Scottish problem and the new clause applies only in relation to Scotland. The clause is complicated, but I shall try briefly to explain the reasons for it.
Under Scottish law, if a person dies leaving a surviving spouse and children, the surviving spouse has a legal right to one third of the net movable estate and the children have a legal right, known as legitim, to another third. These legal rights take precedence over the terms of the testator's will, though the spouse or children may, if they wish, renounce their legal rights so that the terms of the will become effective.
In the normal way there is no particular difficulty about the application of


the capital transfer tax legislation in relation to legal rights, but a problem arises if a person dies leaving a spouse and minor children and provides in his will for the spouse to take the whole of the estate, thus impinging on the children's legal rights to one third of the estate. The same problem arises where the wife is given only part of the estate. Generally speaking, under Scots law a child cannot make an election to claim or renounce his legal rights while still minor. The ultimate destination of the property left to the wife, to which the children nevertheless have legal rights, is is therefore uncertain until the child reaches majority.
The clause is necessary to provide for the capital transfer tax treatment which is to apply in this situation. The scheme of the clause is to provide the executors of the testator with an option. They can choose to pay tax at the testator's death as if the child had claimed his legal rights and the terms of the will had been ineffective. In other words, the first option is for the executors to be able to treat the matter from a tax point of view as if the legal rights override the terms of the will. In that event tax will be paid on the child's share pursuant to legal rights. The spouse's share will he exempt under normal capital transfer tax provisions.
If the child reaches majority and renounces his rights, as I believe is quite customary, in favour of his mother, under the scheme of the clause the renunciation of his rights is not treated as a gift and taxed. The tax paid at death in respect of the child's third share is repaid by the Inland Revenue with interest to the deceased's estate. That share then becomes the mother's share and her share is exempt from capital transfer tax. The net result in that event will be broadly the same as if the will had been effective in the first case and the spouse exemption had applied to all the property destined for the wife under the terms of the will.
The other possible alternative is for the spouse exemption to be claimed at the testator's death on all the property destined for the spouse under the will, including the part representing the child's legal rights. In other words, the executors can treat the situation pursuant to

the will and not pursuant to common law or legal rights.
If the child decides to claim his legal rights when he reaches the age of majority, too little tax will have been paid on the testator's death. The testator's death will have secured an exemption not only for the mother's rights but for the child's rights, and when the child reaches the age of majority he will claim that part of the estate for himself. In that case too little tax will have been paid and tax will be repaid to the Inland Revenue with interest.
5.15 p.m.
The other main feature of the clause is that it negates the capital transfer tax charge that would otherwise have occurred if and when the minor child renounced his legal rights on attaining majority. If the child renounces his rights on attaining majority, they go back to the mother. The new clause negates the capital transfer charge that otherwise would arise because it would be treated, possibly, as a gift.
The new clause has taken some time to appear in legislation because we have had close discussions with the Law Society of Scotland, to which I am grateful, on the best form and the best way of dealing with this difficult problem of providing relief from capital transfer tax provisions given the peculiar position in this instance under Scots property law. I believe that I am authorised to say that the clause has the full agreement of the Law Society of Scotland. There has been considerable discussion of the problem and I commend the clause to the House.

Lord James Douglas-Hamilton: I thank the Minister of State for bringing forward the new clause and for his expert summary of Scots law on this subject. Those who are not aware of what legitim is will find that the best brief description is given by Professor David Walker in his book "Principles of Scottish Private Law". He states:
Legitim…or bairn's part, is the legal right of children and more remote issue to a share in a deceased parent's moveable estate.…At common law claims were limited to legitimate children but illegitimate children now have an equal claim.
That arrangement has worked very well over the years.
I speak briefly to amendments (a) and (b), which I believe will improve the


clause. Their purpose is to remove an anomaly that could lead to unfairness. Under the common law of Scotland, as the Minister has said, the surviving spouse and children of a domiciled Scot have claims to a share of the movable estate once the death and funeral expenses have been deducted. That happens before the deduction of capital transfer tax. These claims under Scots law override the will of the deceased.
By statute these claims have also been extended to a widower's share in his wife's estate and to the issue of a pre-deceasing child. Their claim is in the nature of a debt, although normal debts are dealt with first and take precedence. Where the child or remoter issue has not attained the age of majority, the executors have a duty not to allow the claim to legitim to be defeated before the child or more remote issue has reached majority. When the child is of majority, he can renounce his claim to legitim.
I must thank the Minister for having met the claims and representations of the Law Society of Scotland, but there is one outstanding matter that I must put before him. It is often the case that a spouse leaves a will entirely in favour of the surviving spouse, and, were it not for the legal rights position in Scotland, no capital transfer tax would be paid.
However, the clause gives two options. In the first place, the executors may set aside a fund to meet legitim claims at the death of the first spouse and pay tax on them, thereby limiting the income and capital devolving upon the surviving spouse. On the other hand, they may treat the whole estate as devolving upon the surviving spouse on the assumption that the children or remoter issue will renounce their claims to legitim, in which case the spouses exemption applies to the whole estate.
The problem for the Government arises in that some may claim legitim and others may renounce their share. However, they cannot renounce until they have reached majority. The calculation of the amount of tax payable could present difficulties. The amount of the legitim fund would not be known until the last child or remoter issue had renounced or claimed its share.
The amendments seek to meet this difficulty by limiting the legitim fund for

calculation purposes to the shares of those who have not effectively renounced at the time that the first claim is made. Thus the taxable share of the legitim fund could always be exactly quantified. I hope that the hon. Gentleman will recognise the equity of the amendments and will accept them in due course.

Mr. Nicholas Fairbairn: I support my hon. Friend the Member for Edinburgh, West (Lord James Douglas-Hamilton). The Minister began with a strange point of view. He said that the position was caused by the peculiarity of this branch of the Scots law of property. I differ from him because I think that the situation is normal and the difficult arises—and the new clause is necessary—because of the peculiarity of law of testacy in England, not Scotland. Our law is fairer and more democratic, because it ensures that no parent, for whatever reason, can cut out his spouse or children from at least one third of the movable property.
The difficulty arises—and my hon. Friend put the case well—because frequently the renunciation which is undertaken is not that which merely has to be an agreement. If the children do not say that they will renounce their rights so that "Mum will get it all", they say that under the terms of the will they will get such and such and if they do not claim legitim, they will not get the benefit. The child has to not ask whether it is to his benefit to renounce legitim and not to put it into the spouse's share but whether to claim the children's share or take what he is specifically left.
There are difficulties in the case where there is a family of five children aged from 32 to 8. The matter cannot be resolved if the 32-year-old decides to take what he is left in the will and to renounce legitim, the 24-year-old decides not to do so, the 19-year-old to do so, while the other two children under the age of majority cannot make a decision for another ten years. The amendments fictionally divide the fund into the part which can be chosen or rejected and the part which cannot be chosen or rejected, and that is an important change. The matter is complicated. The tax difficulties of the rejection of legitim to obtain testamentary benefits are more complicated than we have perhaps understood.
I should like the Minister's comments on another matter. Is it fair that interest should run either for or against a child or spouse? The child who opts for rejection or acceptance cannot benefit if he happens to have a kid brother who is 6 months old, who must wait 17½ years to make a decision. Interest would be running for 17½ years after the taking of that option. Although it appears to be fair, it is unfair that a person should be forced to pay interest on a decision over which he has no control.
I hope that I have not complicated the matter too much. Part of the equity of the law of Scotland ensures—whatever characteristics of canniness or meanness we may have—that one-third of what we have will go to our spouse or that half will go to our children if we have no parent left. That is a matter of equity and I hope the tax legislation will preserve it.

Mr. Gordon Wilson: I do not want to take up much time, but I want to pay tribute to the Treasury and the Government for the new clause, which recognises the different legal position in Scotland.
I associate myself, for once, with the remarks made by the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) about the situation of legitim. It is a sensible proposal and it is wrong to say that it is peculiar to Scotland. One might say that it is more peculiar for England not to operate that law.
Whilst the clause will take care of anomalies, it adds to the complexity of the tax set-up and it will give rise to further anomalies. It appears that there is a degree of uncertainty created by the way in which the Government have tackled the clause. It seems to leave a gap in the arrangements and, at face value, it appears that it is right that the gap which applies to the legitim fund should be dealt with in a manner conducive to certainty.
One of the problems of dealing with trust estate involving families with a wide-ranging age group is that of the distortions created by the wide differential. I hope that the Government will listen to the arguments. They are not new, be-

cause they have been put to the Treasury by the Law Society of Scotland. I ask the Government to accept the amendments.

Mr. Denzil Davies: The hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) has suggested two important amendments and I entirely agree with the justice of his case. I propose to recommend to the House that the amendments be accepted, because they improve the new clause in an important respect and they make it fairer.
The matter is complicated. I understand that the wording of the original amendment has been slightly changed and that the hon. Gentleman now wishes to refer to "excluding any part". I prefer that. The hon. Gentleman took me to task for using the word "peculiar". I was using it with its original meaning of "different", not "odd". I was referring to the difference in Scots law.
The hon. Member for Edinburgh, West referred to interest. While I cannot make any commitment, I can see that there is something in the argument and that it might seem right to charge interest in one case and pay interest in another. I do not want to make any commitment, but I will look at this to see whether there is a case for having a limitation on the charge of interest. If we decide, after consultation, that that is a good solution, we shall take action.
The matter is difficult, the right way to deal with it is to ensure that the fiscal provisions accord with Scots property law and I hope that the House will accept the clause with the amendments.

Question put and agreed to.

Clause read a Second time.

Amendments made to the proposed new clause:

(a) in subsection (4) after second 'death', insert
'(excluding any part of the fund renounced before any claim has been made)'

(b) in subsection (4), after third 'legitim', insert
'(excluding any who have renounced as aforesaid)'.—[Lord James Douglas-Hamilton.]

Clause, as amended, added to the Bill.

New Clause 8

CAPITAL ALLOWANCES: SUBSIDIES AND CONTRIBUTIONS

'(1) After subsection (1) of section 85 of the Capital Allowances Act 1968 (allowances in respect of contributions to capital expenditure) there shall be inserted—
(1A) Subsection (1) above shall not apply where the person making the contribution and the person receiving it are connected persons within the meaning of section 533 of the principal Act.

(2) This section applies in relation to contributions made after 8th July 1976'.—[Mr. Denzil Davies.]

Brought up, and read the First time.

5.30 p.m.

Mr. Denzil Davies: I beg to move, That the clause be read a Second time.
The clause is intended to prevent the avoidance of balancing charges in certain circumstances. It amends the effect of Clause 37, which is an anti-avoidance measure relating to balancing charges. Clause 37 defines more closely the disposal value to be taken into account by providing that where there have been transactions between connected persons, the greatest expenditure incurred by any of those persons shall be taken into account in determining the balancing charge.
In its observations on the Bill the Revenue Law Committee of the Law Society pointed out that Clause 37 failed to deal with the position where part of the cost of purchasing an asset was met by a contribution from another person—for example, where it was acquired by a subsidiary and the parent company made a contribution to the cost. The Law Society recommended that the clause should be amended to enable the capital expenditure incurred by two or more persons to be aggregated. The clause follows the advice of the Law Society and tightens the anti-avoidance provisions.
We are grateful to the Revenue Law Committee of the Law Society for drawing the matter to our attention. We are introducing the new clause to prevent the object of Clause 37 being avoided by contributions by connected persons and thereby defeating the purpose of the legislation.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 9

RESTRICTION OF RELIEF FOR PAYMENTS OF INTEREST

'(1) Relief shall not be given to any person under any provision of the Tax Acts in respect of any payment of interest if a scheme has been effected or arrangements have been made (whether before or after the time when the payment is made) such that the sole or main benefit that might be expected to accrue to that person from the transaction under which the interest is paid was the obtaining of a reduce Lion in tax liability by means of such relief as aforesaid.

(2) In this section "relief" means relief by way of deduction in computing profits or gains or deduction or set off against income or total profits.

(3) Where the relief is claimed by virtue of section 259(6) of the Taxes Act (group relief) any question under this section as to what benefit might be expected to accrue from the transaction in question shall be determined by reference to the claimant company and the surrendering company taken together.

(4) This section applies—

(a) where the payment is after 8th June 1976; and
(b) as respects relief—

(i) under section 248 or 259(6) of the Taxes Act in relation to the total profits for an accounting period beginning after that date or for any part falling after that date of an accounting period beginning earlier; or
(ii) under section 75 of the Finance Act 1972 in relation to income for the part of the year 1976–77 falling after that date,
where the payment is on or before that date.

(5) For the purposes of subsection (4)(b) above—

(a) the total profits for part of an accounting period shall be so much of the total profits for the whole period (reduced by any relief otherwise than in respect of the payment or payments in question) as is apportioned to that part;
(b) the income for part of a year of assessment shall be so much of the income for the whole year (reduced by any relief otherwise than as aforesaid and otherwise than under Chapter II of Part I of the Taxes Act) as is apportioned to that part;
and any apportionment for the purposes of this subsection shall be made on a time basis.'.—[Mr. Robert Sheldon.]

Brought up, and read the First time.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): I beg to move, That the clause be read a Second time.
The purpose of the clause is to remove the eligibility for tax relief for interest


paid under a scheme where the sole or main benefit that might be expected to accrue from the loan transaction would be the obtaining of such a relief. It gives effect to the Government's intention detailed in a reply by my hon. Friend the Minister of State on 8th June, when he announced that the Government intended to introduce legislation on Report to counter avoidance by means of artificial interest payments. These concern schemes of a quite artificial character which involve the payment of interest where no genuine provision of finance to the payer has been incurred and no genuine expenditure has been made by him. These schemes are contrived and artificial. Some have even involved payments of so-called interest in advance for nearly 100 years. The artificiality is blatant and the avoidance serious. The sums of money involved have been very large.
Under the existing rules, annual interest is a charge on income and allowable as a deduction for corporation tax. If the interest exceeds the profits and was paid for the purpose of the company's trade or business, it can be carried forward against future profits. For a group of companies group relief is applicable. These avoidance devices have been used on a substantial scale. On the information available to the Government, as much as £50 million in tax may be involved. We are not sure whether that is the total.
There is clearly an urgent need to protect the revenue from such avoidance devices. The Government have carefully considered their approach to the matter. We realise the problems when we consider a test based on "sole or main benefit". We have come to accept the need for that test because the rules governing the allowance of interest are extremely intricate and complex. Any attempts to stop such schemes by tinkering with the present rules could have created difficulties for perfectly acceptable operations, and at the same time, we could not have been sure that the loopholes would be completely closed.
An alternative was to defer the legislation until next year. There were problems about that as well, because of the announcement that had been made and the uncertainty that would have been created for a number of innocent trans-

actions. We have been very much concerned about the need to protect the innocent operators from being caught by such provisions.
The clause says that the new rule will be applied to all payments made after 8th June and to payments made before that date if they would otherwise be relieved against profits or income falling after that date. That is an essential part of the legislation, arising from a number of conspicuous cases that have reached the headlines. I am unable to comment on them in detail, but I may have said enough to show the necessity for the clause.

Mr. David Howell: We understand that this is an anti-avoidance clause. It is proper for the Government to seek to protect the revenue. We understand their motives, but it is a melancholy reflection that they should put so much energy into the ceaseless closing up of loopholes. It is part of the inevitable outcome of a high-tax régime, which the Government insist on running. If that is how they wish to do things, though we think that it is wrong and counterproductive, they will create loopholes, and it is their duty to introduce anti-avoidance measures to close those loopholes.
We should like more reassurance on the "sole or main benefit" test. The hon. Gentleman said that he was anxious to protect the bona fide borrower in every way, and that should be the aim of the House as a whole in approving the clause. Let us suppose that a borrower raises a substantial loan involving substantial interest payments, and various arrangements are made which look as though they they would lead to avoidance. However, it is done in good faith, but subsequently the borrower finds that he had no need for the loan.
He will then be left in a situation in which the "sole or main benefit" would, temporarily, until he has made new arrangements, be one flowing from the fact that there was a substantial interest and an offset against his other tax liabilities. They may from innocent motives be caught by this clause. I can think of circumstances in which bona fide borrowers could find themselves, for reasons that were not apparent when the loan was raised, caught by the clause,


although they had no intention of employing the kind of avoidance arrangements against which this measure is aimed. I hope that the Financial Secretary will assure the House that he has built into the clause adequate safeguards to ensure that bona fide borrowers are not caught by its provisions.

Mr. Richard Wainwright: Liberal Members welcome this clause, but we can hardly refrain from commenting that its appearance in the history of corporation tax has been extremely late. The loss of money and the loss of taxpayers' morale are very serious indeed. I understand that we have not heard the last of Press revelations over the use of this device. The irony is that at bottom it is a simple device indeed.
Let it not be said that this is some highly sophisticated contraption that has been thought up. It is simply a toy horse that has got through the gaping hole in the legislation. If only the Government and the Inland Revenue would seriously and genuinely engage with the accountancy profession in proper pre-legislation consultation instead of putting up an appearance of doing so, it would secure co-operation in spotting loopholes which, when examined, turn out to be glaringly obvious.
Damage to taxpayers' morale is caused by the fact that this has been so simple. We are glad at long last, although too late in the day after much revenue has been lost, that this loophole appears to be on the way to being closed.

Mr. Nicholas Ridley: I was interested to hear the new phrase introduced into these debates by the hon. Member for Colne Valley (Mr. Wainwright)—namely, the term "taxpayers' morale". I believe that the taxpayers' morale is pretty low as a result of the amount of the tax they have to pay. I doubt whether their morale rises significantly when they feel that some other poor unfortunate devils have been caught by some loophole-closing device. I think that there would be less need for loophole closing if it were not for the general restrictiveness of the tax system and the high level of tax.
I support the clause but I do not do so with the alacrity and glee shown by the hon. Member for Colne Valley, whose

morale no doubt rose merely because of the appearance of this provision on the Amendment Paper. No doubt the hon. Gentleman's morale is in need of a little bit of boost. Obviously, something must be done to improve the morale of the Liberal Party. If it satisfies that test, that is a reason for welcoming the clause. I am sorry that the Liberal Party has fallen so low that it has to find a lolly-pop to cheer itself up.
This problem arose because of the complicated nature of the 1974 Act, which set out the £25,000 limit and the many qualifying conditions on the interest at that time. The Standing Committee that waded through that Finance Bill found its provisions immensely complex. I do not believe that these matters need to be so complex. I think that all personal interest should be allowable, or none. The £25,000 limit is a most complex and unhappy compromise between the two.
5.45 p.m.
I wish to refer to the phrase "sole or main benefit" in the clause. That could be misinterpreted, particularly by an over-zealous Revenue inspector. Of course one receives a benefit every time one gets loan interest that is tax deductible. Clearly, there are many projects of this kind. If somebody wishes to borrow money to start a business or to buy a house, both of which are purposes for which interest is liable, he would not take on that task unless the interest were allowable. Indeed, the person concerned could not pay the interest on the sum borrowed if he had to pay it out of his taxed income. Therefore, the whole scheme hinges on the person being able to set interest against tax.
It could be argued that the main benefit accrues to him because the interest is tax deductible. The words in the clause are very wide. Quite innocent people may be caught by this system. It will rest very much on the discretion of the tax inspector.
The Financial Secretary said that there may be innocent transactions which he would not want to catch. I thought that he was going to avoid catching them by using his discretion or that of the tax inspector, but that is not good enough. Taxation matters must be precise. Perhaps he would explain a little more fully the meaning of the words "sole or main benefit" and assure the House that there


is no discretion in the matter. If the Minister makes these matters clearer, I am sure that the House will be happy to agree to this clause.

Mr. John Cronin: I welcome the new clause. I cannot accept the view that tax avoidance schemes are brought in only when taxation proposals are introduced by a Labour Government. I recollect on earlier Conservative Finance Bills facing similar avoidance provisions. The answer is that, come what may, tax avoidance will be a permanent industry, whatever the Government in power.

Mr. Ridley: Does the hon. Gentleman agree that as one increases the level of taxation, the point arrives when people begin to seek tax avoidance schemes, but if one decreases the level of the taxation people surely will cease to bother to pursue such schemes.

Mr. Cronin: I would not accept that. I believe that tax avoidance schemes are necessary. I do not think that the level of tax has more than a marginal effect on the situation.
Each year as we debate Finance Bills we hear about some new tax avoidance scheme which has to be dealt with by an appropriate new clause or amendment. I wonder whether we shall always have to find ourselves in the situation of changing tax provisions only after many people, because of gaps in the legislation have made large sums of money. Is there not some regular system of surveillance by the Treasury to enable corrective action to be taken in the next Finance Bill? It appears that we introduce these avoidance provisions only after gigantic sums of money have been made by the taxpayer. Therefore, may we be told whether the Treasury is taking action on this score and whether there is constant monitoring of these situations?

Mr. Robert Sheldon: I begin by referring to the point made by my hon. Friend the Member for Loughborough (Mr. Cronin) about the need for surveillance and monitoring. This is a very important point that should exercise our attention. The difficulty arises from the delay arising between the initial introduction of a scheme and the time when it becomes known to the Revenue. We find that we are able to shorten this

period, but the point is being further examined. We shall aim for a shortening of the time lag.
I accept the point made by the hon. Member for Colne Valley (Mr. Wainwright) about the need for close contact with the accountancy profession. This liaison has been improving in recent years under Governments of both complexions, but more progress needs to be made in that direction.
The hon. Member for Guildford (Mr. Howell) rightly asked for some assurance that there would be no problem for innocent parties seeking arrangements whereby they undertook to pay interest for genuine business purposes. I can give the hon. Gentleman the assurance that those paying true interest for genuine business purposes will not be caught by this scheme. To give him the definition, which I think also deals with the question put by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), in a genuine commercial scheme the main benefit is to secure finance. If that is applicable, those people will not be caught by the main benefit test and they will be perfectly free to go about seeking and undertaking any transactions which fall within that definition.
The natural anxiety of the hon. Member for Guildford is that these matters are closely watched. I can give him that assurance. That is to the advantage of the kind of people mentioned in this debate so that we do not entrap those perfectly legitimate and proper cases where people are prepared to pay the interest and get it allowable against tax. We are concerned about people who resort to some of those very peculiar devices of the kind which show an immense amount of ingenuity and, as the hon. Member for Guildford said, with such unfortunate results.

Mr. F. P. Crowder: I feel that this particular new clause strikes at the whole concept of society as it is today. We are in the position that the Government of the day are taking the view that if families save money which, after all, is hard won, and are earning an income from that money, that money should be heavily taxed. To my mind, that is all wrong. I do not think it right that earnings from investments, which have been saved from hard work, should be


treated any differently from earnings by a surgeon, or a barrister—I speak for myself—or someone in any other walk of life.
I quite appreciate that we have got to a situation now where there are loopholes which the Treasury is endeavouring to close. But at the end of the day, where are we? The present position means that it is not worth earning money and investing it in investments and savings because if one earns enough at the top rate, one will pay 98 per cent. in tax. That is not the way of life in England, and I hope that it never will be.
It seems to me that for the past 15 years what has been happening is that we in the House, be it the Labour Party or the Conservative Party, have imposed penal taxation upon earners and people who derive their benefits from unearned income, and for one reason only—to satisfy the trade unions, which at the moment govern this country, as I well know.
Admittedly, when I first came into this House some 26 years ago those people used to be on the Labour Benches. They are no longer here and we cannot talk to them and deal with them. Such people were very sensible and helpful, Instead, today we have a lot of broken down university lecturers and television people.
But the tax system worked fairly well on the basis that loopholes were allowed and on the basis that the trade unions were satisfied with the situation as it was, and everybody managed to keep up his small vicarage, or country house, or whatever it might be. A nod is as good as a wink, but I notice that in this Parliament we have a very different attitude in that everything has to be tidied up and every loophole has to be closed. We have to have a few loopholes in life, because they give one a little bit of elbow room.
Can the Minister imagine anything more ghastly than a young man of 21, 22 or 23 setting out to make a career in this country? How can he make any capital which he can hope to retain? If that young man succeeds in his profession, he might earn £15,000, £20,000, or £28,000. If my tax tables are right, one would have to earn £30,000 in this country to retain £10,000. That is not

very much. When we bring inflation into consideration it is equivalent to about £4,000 or £5,000 about 14 or 15 years ago. There is no hope of a young man in this country today building up a fortune or a business.

Mr. George Cunningham: The hon. and learned Member does not have his tables right.

Mr. Crowder: I think I am absolutely right. I am glad the hon. Gentleman intervened. I have them in mind. I think the hon. Gentleman will find that on an income of £30,000 one keeps £11,000, and on £15,000 one keeps about £8,000. I should be glad to give way to the hon. Gentleman if I am wrong. But where is the saving when one has to pay 12p for that ridiculous newspaper The Times which, unfortunately, one has to read? That is the present situation in this country.

Mr. Ian Gow: My hon. and learned Friend makes remarks about The Times, but the editor of The Times wrote a very powerful, and my hon. and learned Friend may think, irrefutable argument about the importance of monetarism in today's edition. Perhaps he should read that.

Mr. Crowder: I had the advantage of reading it but, equally, I had the disadvantage of having to pay for it. After all, we are not paying 2d for The Times today: we are paying 2s. 4d. [An HON MEMBER: "12p."] That is 2s. 4d. All we need to do, if we are charged 12p is to put a line through and that is it.
The situation is becoming increasingly serious. If we are to close these loopholes as the Minister suggests, we shall all be living in "two up and two down" houses. We should not be able to keep a house of any consequence, however small. We shall be gradually pushed into being a Communist State, and I am sorry to have to say that. I do not think that is what the Chancellor wants.
6.0 p.m.
If we are to tax people—combined with inflation—on the basis of this Finance Bill, they simply will not survive. Some people have the good fortune to have works of art which they can take to the sales rooms in Bond Street, and they can just survive and keep their


noses above water. We shall destroy our heritage if we go on like this.
For goodness' sake, let a few loopholes remain. It will keep the trade unionists happy and, in any case, they will not understand them. If we go on in this way, we shall get into the situation with which we were faced yesterday—and a more disgraceful performance was not to be found—when the Leader of the House attempted to say why there must be a differential among Members of Parliament, who are to have another £6 a week. Can anyone beat that? I shall never forget a Labour Member saying to me the other day, "There is no status, there is no money and the hours of work are quite impossible". Are we to degrade this great nation into that sort of circumstance through the Finance Bill? It simply is not on.

Mr. George Cunningham: Is this in order?

Mr. Crowder: No, of course it is not. So I will sit down.

Mr. Speaker: I am obliged to the hon. and learned Member.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

6.0 p.m.

Mr. Speaker: Mr. Denzil Davies, to move New Clause 18.

Mr. Ridley: Can you tell me, Mr. Speaker, why the Government new clauses are in order up to New Clause 9 and then we go to New Clause 18. followed by New Clauses 19, 20, 23 and 24, and then back to New Clause 10? Does not 10 normally come after 9? Is it just that Government new clauses always come first?

Mr. Speaker: The answer is simply that how the new clauses are numbered depends on the order in which they are handed in.

Mr. Ridley: Further to that point of order, Mr. Speaker. I think that the order in which they were handed in was Government New Clauses 7, 8 and 19 and then a number of Opposition new clauses—Nos. 10 to 17—and then another lot of Government new clauses —Nos. 18 to 20 and 23 and 24. As they

are numbered in the order in which they are handed in, why are they not taken in the same order? No doubt there is a perfectly good explanation.

Mr. Speaker: I am sure that there is. I shall try to find out and let the hon. Member know.

New Clause 18

RELIEF FOR WOODLANDS

In Schedule 9 to the Finance Act 1975, in paragraph 6(2)(b) (expenses allowable under the Schedule to include those incurred in replanting within three years of a disposal) after the word "disposal" there shall be inserted the words "(or such longer time as the Board may allow)".—[Mr. Denzil Davies.]

Brought up, and read the First time.

Mr. Denzil Davies: I beg to move, That the clause be read a Second time.
The new clause gives a small relief in the case of woodlands. Perhaps I might first say something about forestry and capital transfer tax. We have not been able to meet some of the amendments tabled in Committee, and it is only fair to say something about why one or two of them are not down on Report.
In Committee, my right hon. Friend the Chief Secretary explained that he was involved in discussions on various amendments about whether relief from capital transfer tax should be restricted to woodlands that were under dedication schemes. My hon. Friend the Member for Aldridge-Brownhills (Mr. Edge) mentioned this point and my right hon. Friend said that he wanted to look at the problem of broad-leaf woodlands.
I think that there is general recognition that the arguments on dedication are finely balanced, given the legitimate differences of view which have been expressed. It has not therefore been possible to reach agreement about dedication in time to do anything in this year's Finance Bill. That is why there is no amendment down at this stage.
As well as the dedication point, some concern has been expressed—

Mr. Peter Rees: There was considerable debate in Committee about whether small woodlands which were not eligible for dedication should rank for relief. Is the Minister now saying that he hopes at some time


to bring forward a new clause affording relief to those woodlands?

Mr. Davies: Perhaps the hon. and learned Member will wait a few minutes, and I shall try to deal with these points generally.
Besides the dedication problem, especially the one that the hon. and learned Member has just mentioned, there has been some discussion over the last few years about the effect of taxation in general, and CTT in particular, on woodlands and woodland owners. Concern has been expressed in some quarters about the level of tree planting. There are considerable reliefs, grants and benefits for woodland owners, and it is by no means clear that the fall in planting which has taken place has been the result of fiscal legislation. There are many factors to be taken into account.
However, I recognise the concern and I have decided to set up an interdepartmental review of the whole question of how forestry is affected by Government policies on taxation, grants and amenities. The dedication issue would be among the matters covered. The point raised by the hon. and learned Member for Dover and Deal (Mr. Rees) will be covered in this review as well. The intention is that the review group will be able to report in time for any further tax measures, if necessary, to be implemented in next year's Finance Bill. It will be able to take evidence from organisations concerned with forestry, on both the employers' side and the 'employees' side.
I hope the House will recognise that we appreciate that the situation of woodlands has changed over the last few years. We wish to set up the group in good faith to see how forestry is affected by a whole range of Government policies —not only taxation in itself, although that will come into it.
The new clause amends Schedule 9 to the Finance Act 1975 so as to give the Board of Inland Revenue discretion to extend the period of three years in which the expenses of replanting can be set against the value at disposal of trees in respect of which there has been an election for deferment of CTT liability.
The Forestry Committee of Great Britain and the Forestry Commission have said that it can take up to seven years to

get planning approval, for example, from a local authority for a replanting scheme. Under paragraph 6 of Schedule 7 to the 1975 Finance Act, expenses incurred more than three years after disposal would be allowed on the occasion of the next disposal, but that could involve a long wait for the owner who gets relief —for example, until the new trees come to maturity when woodlands have been felled.
In these circumstances, we think that we should extend the replanting expenses relief after three years in those cases in which there are circumstances outside the control of the planter which make it impossible for him to replant within three years—planning restrictions, for example.
I recommend the new clause to the House.

Mr. John Nott (St. Ives): We are naturally grateful for this minor concession on planting relief. This is probably not the appropriate moment for a full debate on woodlands, so I shall say only that we welcome this concession as far as it goes.
However, we are in some difficulty when, entirely without warning—this is no criticism of the Minister of State—the hon. Gentleman makes a welcome statement on a vast and complicated subject. It would have helped if one of my hon. Friends had been advised that this statement would be made. We should then naturally have made some response to it.
Off the cuff, I would say that an inter. departmental review sounds a good idea, We welcome it, and I hope that I am not carping if I say that we do not understand why it comes only at this late stage. My hon. Friends debated the effect of capital transfer tax on woodlands at great length when the tax was introduced more than a year ago. I am unclear why the review was not set up before the tax was designed or, if that was not possible, why a review of the impact of taxation and other things on forestry could not have been conducted during the last year.
I recognise why the Government have to keep saying that CTT is not the villain which has caused the stopping of planting. We all know that planting has come


to a stop largely because of uncertainties surrounding CTT. The woodlands interests have made this plain in endless representations to the Government over over the last two years.
Neverthless, we accept that this is a very complicated matter. I am glad that there is to be a review. We hope that out of it will come further assistance to woodlands. As was said in Committee, we very much agree with the hon. Member for Aldridge-Brownhills (Mr. Edge) in his comments on broad-leaf woodlands and hedgerows, the need to encourage small woodlands and their planting for amenity and other reasons. There is a completely bipartisan feeling on both sides of the House that anything we can do to encaurage the planting and preservation of hedgerows and trees is to be welcomed. We shall therefore look forward to the Government next year putting down firm proposals to encourage this side of the environment. We only regret that this has not been done sooner.

Mr. George Thompson: Before the Budget this year, I wrote to the Chancellor of the Exchequer on behalf of my constituents asking him to bear in mind the problems of agriculture and forestry in relation to capital transfer tax. I received a charming letter from the Minister of State assuring me that these things would be borne in mind. Since we were coming near to a Budget, I am quite sure he knew that there would be concessions on agriculture, but when the final announcements were made forestry had been left out.
I raised the question of the worry and concern over private forestry which was felt in Scotland during Question Time in the House on 30th June. I asked the Secretary of State:
whether he will introduce measures to encourage the restoration of private sector tree planting to the level reached in 1973–74.
The Under-Secretary of State for Scotland replied:
The Government have noted the drop in private sector planting but are not convinced of the need for any new measures at present, although we are keeping a close watch on the situation."—[Official Report, 30th June 1976; Vol. 914, c. 371–2]
I am glad to see from the new clause we are now discussing that the Government have decided that further measures are desirable, and the Minister has now

announced the setting up of an interdepartmental group to review all the problems of forestry. I am glad to know that the Treasury has responded to the spirit of my Question, if rather belatedly, because the decline in planting in the private sector will not readily be made up until things are stabilised once more.
It is also very grudging, because the Minister himself has acknowledged that this is only a very small concession. Obviously, however, we must welcome any concessions at all. I am still convinced that the Treasury as a whole does not understand forestry—at least, forestry in the way we practise it in Scotland, where we regard it as a national form of land use and not simply as a pleasant background to our landscape or a place for recreation, as apparently is the case in the South of England.
Sometimes I wonder whether the Government as a whole do not care too little about forestry. We are still waiting for them to appoint a chairman to the Forestry Commission, although the previous chairman has now departed from office. That seems incredible for an organisation the size of the Forestry Commission. I do not know whether Treasury Ministers will have been authorised to make another statement on that subject, since it is apparently a Treasury Minister and not one of the Ministers responsible for forestry who has had to announce the setting up of the interdepartmental group.
I agree with the hon. Member for St. Ives (Mr. Nott) that this should have been done before capital transfer tax was applied to forestry in the way that it was rather than try to make the group act as an apologist for it, because it was a disgraceful tax in the sense that many who should have paid it never did. As a concept, capital transfer tax is a valuable improvement. I very much hope, however, that the interdepartmental group will review all these matters, and on behalf of my party I welcome the new clause.

6.15 p.m.

Mr. Norman Buchan: I agree with the hon. Gentleman who suggested that this was not an opportunity for a general discussion on forestry, but some things should be said. /t is clear that the fall-back has been due to the change from the extremely beneficial tax rates which had prevailed


before 1973. It was the shock of that change rather than any uncertainty about the capital transfer tax that caused the fall-back in private planting. I welcome this provision, though I have doubts about the future of private planting. I am glad that this concession has been made to apply for such longer period as the board allows.
May I question the criteria to be applied? It is an extremely open door, and it would be useful to know the criteria, the kind of problems, the timing, whether this is to be linked with planning permission delays, and so on. It would be useful to have that spelt out, because I would oppose a completely open door with regard to the time available for this tax. It will be useful to have that information in detail before the clause is accepted.
The hon. Member for Galloway (Mr. Thompson) has said he hoped that the interdepartmental group would explore all the aspects of forestry, but will it do so? I noted that my hon. Friend the Minister linked this subject precisely to taxation. If it is to go wider, I hope that there will be a cost-benefit analysis of public expenditure for public planting, because we require to see forestry as a future major industry, particularly in Scotland, and this can be carried out only by public expenditure and Forestry Commission planting. That should be the future approach rather than any tax changes to try to encourage the private forester.
In the past we have lost much good land which has been available to the private forester and also to the Forestry Commission. We can get infinitely better land use with a planned programme which requires public control and public expenditure under Forestry Commission supervision. if the points on cost-benefit analysis and the relationship with tax loss as opposed to public expenditure can be looked at, I welcome this proposal.
My hon. Friend the Minister spoke of evidence being produced by employers and employees, presumably by the private landlord, the private forester and workers in the industry, but the matter goes a good deal wider. A number of industries are involved, and I hope the review group will be dealing with aspects other than those narrowly concerned with

the precise aspect of planting and the workers involved in it.

Mr. Hector Monro: I wish to make one or two comments on the Minister's statement and particularly to urge upon him the importance of speed. I hope he realises—as I believe he will from debates we have had on capital transfer tax since it was introduced two years ago and the very critical reception that it had in the House—that it was extremely unpopular in the world of private woodland ownership. There is no doubt that the lack of confidence that prevailed with the introduction of capital transfer tax has continued, and the changes that may come from the inquiry which the Treasury has instigated can only be welcomed if there is further mitigation of the present taxation system.
In view of the fact that in the last two years plantings have dropped as dramatically as something of the order of 50 per cent., speed is the essence of the message I am now giving the Minister. If he can bring forward proposals by the time of the next Finance Bill, at least something will be salvaged from a very desperate situation. I hope he will ask those whom he appoints to inquire into the taxation system to report certainly by the end of the year and then to have consultations with forestry interests, so that the very best advice can be obtained.
I disagree with the hon. Member for Renfrewshire, West (Mr. Buchan) that all future financing should be towards a State forestry system. I make no criticism of the Forestry Commission. It is doing an excellent job, particularly in the sectors of recreation and tourism. For it to produce timber, however, to make any dramatic impact on our balance of payments at present or in 20, 30 or even 50 years' time is obviously impossible. We must have a combination of the private and public sectors in the timber industry for generations to come.
I welcome this modest concession and hope that the Minister will get his inquiry moving quickly.

Mr. Peter Rees: In rising to give a guarded welcome to the Minister of State's announcement, I should declare a small personal interest in that I plant trees, not in Scotland but in Wales.
The hon. Member for Renfrewshire, West (Mr. Buchan) seems to think that forestry can be undertaken solely by the Forestry Commission. I should counsel him to study the replies by representatives of the Forestry Commission to questions put to them by the Select Committee on a Wealth Tax. They made it clear that the commission was not equipped, ready or willing to undertake the whole range of forest planting which the country needs. Therefore, there is a definite place—I hope that there will continue to be a definite place—for private planting in the scheme of things in this country. On that basis, I give a guarded welcome to the Minister's announcement.
I hope that the Minister will not think me churlish in saying that it was a pity that the interdepartmental group was not set up before the introduction of capital transfer tax. I hope that the group's attention will be drawn to the recent article by Lord Taylor in The Times. It must be a matter of speculation why a person does not plant in any given year. However, it would be flying in the face of all the indications and evidence to suppose that capital transfer tax has not made some impact.
Forestry, by its nature, is an industry, if one must call it an industry, in which a person must take a long view. The chops and changes of Government policy are calculated to discourage people from committing their limited resources in this area. Therefore, I hope that the interdepartmental group will report quickly.
I associate myself with the remarks made by my hon. Friend the Member for Dumfries (Mr. Monro). Private forestry interests require a definite long-term commitment from the Government to the welfare of both public and private forestry. I hope that that is the sentiment that underlies the statement made by the Minister of State. This is another example of the Government having legislated first and thought afterwards. So be it. Let us hope that their second thoughts will provide some reassurance for forestry interests.

Mr. Robert Cooke: I am sure that we should do everything possible to restore the confidence of the private owner. We should do nothing to prevent private owners planting broad-

leaf trees. I hope that the inquiry will have among its members representatives of the Historic Buildings Councils, because trees are of prime importance in relation to historic buildings.
No one has so far mentioned the felling of broad-leaf trees on a scale to pay taxes. Hard-pressed private owners are felling more than we would like them to fell. I hope that the Government will address themselves to that point. Excessive felling will leave scars on the landscape which will not be made good until long after members of the Government—and, for that matter, all of us—are dead.

Sir John Gilmour: I should like to add to what some of my hon. Friends have said about the need for the inter-departmental group to speed up its work.
My hon. and learned Friend the Member for Dover and Deal (Mr. Rees) mentioned that the evidence given by representatives of the Forestry Commission showed that the commission could not undertake the necessary amount of planting. One thing which is becoming certain is that the single biggest bill that we shall have to face over the next few years is for timber and timber products. Therefore, it is essential that we speed up the maximum potential rate of private planting. We cannot afford to allow planting not to take place in view of the extreme pressure on our balance of payments occasioned by the import of timber and timber products.

Mr. Denzil Davies: I should like to reply briefly to some of the points that have been made.
First, I apologise to the hon. Member for St. Ives (Mr. Nott) for not informing him about the setting up of the interdepartmental review. It is entirely my fault. However, I note that the hon. Gentleman welcomed the setting up of the review, albeit uncharacteristically churlishly coming from him. Despite that, however, I note that he welcomed the review.
My hon. Friend the Member for Renfrewshire, West (Mr. Buchan) raised a number of matters. First, he asked whether there were any limits to the Inland Revenue's discretion. I assure him that there are limits if the circumstances are completely outside the control


of the planter. The kind of example we are looking at is where planning permission has been delayed longer than three years. It is not meant to be an open-ended discretion. The circumstances must be outside the control of the person seeking the benefit of the exemption.
My hon. Friend asked whether the review would be confined to the taxation aspect. I tried to make clear in my opening remarks that it would not be confined to taxation. It will examine the whole range of Government policies relating to forestry. Taxation will be part of it. My hon. Friend will know better than I that the Government give considerable assistance in the tax system and otherwise to forestry. The Committee will consider the whole range of Government policies relating to forestry. I take the point that the review should be completed as quickly as possible. I do not want to prejudge the inquiry, but I take the point that we should try to complete it as soon as possible and that any recommendations should be incorporated in legislation without delay.
I think that I have dealt with most of the points that were made. This interdepartmental inquiry will be chaired by the Treasury. but other Departments are involved. The Department of the Environment will be involved and it will no doubt consult the Historic Buildings Council.

Mr. Robert Cooke: Will not the inquiry contain representatives of the Historic Buildings Council?

Mr. Davies: There will no doubt be consultation with the Hostoric Buildings Council. I was asked whether other organisations could be brought in. They will also be considered. This is an attempt by the Government to show that we are committed to forestry and that we consider it to be extremely important. We want to look at this matter again in the light of what has happened during the last few years. I hope that the House will accept the review as an earnest of our commitment.

Dr. Alan Glyn: The Minister has explained about the review. Will he tell us whether it will include representatives of the Forestry Commission and of private ownership and what are the relative pro-

portions of ownership between the two? Does he agree that there should be a good forestry industry and that there is a place within that industry for both private and public ownership?

Mr. Davies: The Government give considerable assistance to both the private and the public sectors of the forestry industry. The review will look at Government policies in both areas to see how they impinge upon them.
I have tried to answer all the points that were made. I hope that the House will now accept the new clause, which is a minor but important extension.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 19

ACCEPTANCE OF PROPERTY IN SATISFACTION OF TAX

'In Schedule 4 to the Finance Act 1975, in paragraph 17(4), for paragraphs (a) and (b) there shall be substituted—
(a) any picture, print, book, manuscript, work of art, scientific object or other thing which the Treasury are satisfied is pre-eminent for its national, scientific. historic or artistic interest;"'.—[Mr. Denzil Davies.]

Brought up, and read the First time.

Mr. Denzil Davies: I beg to move, That the clause be read a Second time.
This new clause adds the words "works of art" to the categories of heritage property which the Board of Inland Revenue can accept in satisfaction of capital transfer tax provided that the Treasury is satisfied that the property is of pre-eminent quality. It also adds "artistic" interest to the list of criteria for the Treasury to take into account.
This clause, together with New Clause 20, implements the Chief Secretary's undertaking in Committee to meet the substance of New Clause 80 which was moved by the hon. Member for Bristol, West (Mr. Cooke), as reported at cols. 1790–91. This is not a major new clause. It deals to some extent with a drafting anomaly. I recommend it to the House.

6.30 p.m.

Mr. Peter Hordern: I refer the Minister to an undertaking given by the Chief Secretary


in a similar debate on 5th March 1975. The debate concerned objects of art and pictures held not by individuals but by discretionary trusts. I assumed that this position was dealt with in Clause 76 of the Bill. However, I am informed that that is not the case. Under this clause, objects of art and pictures which are held by discretionary trusts are not exempt from capital transfer tax. I cannot believe that that is the case, because the nature of the undertaking given by the Chief Secretary last year was absolutely clear. If the Minister of State would like to reassure me on that point, I shall be happy not to proceed with my remarks.
In his remarks last year, the Chief Secretary said:
However, I promise the hon. Gentleman"—
that was me—
and the House that we intend to meet the point in a future Bill."—[Official Report, 5th March 1975; Vol. 887, c. 1553.]
I thought that that point had been properly covered in Clause 76 of the Bill. It may be that I am misinformed about that. However, the nature of the undertaking was absolutely clear. I hope that the Minister of State will reassure me that the position regarding objects of art and pictures held in discretionary trusts is fully covered and that they are exempt, as are other objects of art held by individuals, from capital transfer tax.

Mr. Cronin: I appreciate that last year we devoted considerable discussion to this principle. However, I should like my hon. Friend the Minister to say what steps are normally taken to value works of art. I am not clear how the amount of tax is offset against a work of art. There is an imperfect market for paintings, works of art and scientific objects. It seems that there may be wide variations in what these items cost. I remember reading in a newspaper recently that the Tate Gallery bought what appeared to be a load of old bricks for a large sum of money. It seems to me that if a load of bricks was given to the Treasury in satisfaction of a debt, the Tate might not find that entirely satisfactory. On the other hand, the Treasury's advisers might say that the load of bricks was a work of art and worth a lot of money.
There are all kinds of anomalies. There is a wide variation between the

sale-room price of a work of art and the price which a dealer would charge for it. Dealers in pictures and works of art tend to think in terms of a mark-up of about 100 per cent. It is not clear how the Treasury would arrive at the right figure in view of those variations.
Will my hon. Friend say what is the present policy of the Treasury on the disposal of works of art, once acquired? In what way are the works of art used for the national interest, and what are the financial arrangements for their disposal?

Mr. Robert Cooke: There is no need for me to speak now as I see that the Minister is about to reply.

Mr. Denzil Davies: I shall deal with the points which have been raised, although they are not entirely germane to the new clause.
The hon. Member for Horsham and Crawley (Mr. Hordern) raised a point about the undertaking which was given last year by my right hon. Friend. He will recognise that that has nothing to do with the new clause. Not having studied the undertaking, I am not in a position to go further into the matter. It may be relevant, it may not. I am not in a position to expound on that undertaking, if such undertaking was given. However, I shall look into the point and give the hon. Gentleman my reply as soon as possible. I hope that that will satisfy him at least to some extent.
My hon. Friend the Member for Loughborough (Mr. Cronin) raised two general points. They concerned the costs of valuation and how the Treasury valued these works of art. The Treasury employs expert valuers, depending on the nature of the item. The valuers are skilled. No doubt they take all factors into account. They value the works on the basis of open-market value. The Treasury is extremely conservative and would not accept a load of old bricks. My right hon. Friend the Chief Secretary would not allow me to do that even if I wanted to.
I do not have the answer to the question about the disposal of works of art. I shall give my hon. Friend an answer later. The matter goes slightly wider than the new clause.

Mr. Robert Cooke: I thought that the Minister dealt with the points most


eloquently. However, a certain substance was lacking in what he said. If I speak slowly, he may be able to study a piece of paper which has been given to him and give us the benefit of his study of the matter.
On 5th March 1975 the Chief Secretary, in reply to my hon. Friend the Member for Horsham and Crawley (Mr. Hordern), said:
However I promise the hon. Gentleman and the House that we intend to meet the point in a future Bill."—[Official Report, 5th March 1975; Vol. 887, c. 1553.]
That must have meant this year's Bill.
I return to the new clause and the point raised by the hon. Member for Loughborough (Mr. Cronin). The point about the Treasury accepting works of art in lieu of tax is that it must make it more attractive to the owner to surrender his work of art in lieu of tax and see it in a public collection. It must be made more attractive for the owner to do that than to sell it on the open market. Otherwise, great numbers of works will be dislodged and bought by people wanting to take them out of the country. In addressing themselves to this point, the Government must realise that if there is a generous provision to make it more attractive for people to surrender their works of art in lieu of tax, the works are more likely to find their way into public collections.
The bricks in the load referred to were not old. They were brand new, though I must confess that they were incomprehensible to me—but they were none the worse for that.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 20

GIFTS FOR PUBLIC BENEFIT

'In Schedule 6 to the Finance Act 1975, in paragraph 13(2)(f), for the words "or historic or scientific" there shall be substituted the words "scientific, historic or artistic".'.—[Mr. Denzil Davies.]

Brought up, and read the First time time.

Mr. Denzil Davies: I beg to move, That the clause be read a Second time.
This new clause goes with the previous one, New Clause 19. It fulfils the undertaking given by my right hon. Friend the

Chief Secretary to meet the substance of New Clause 80, which I think was moved in Committee by the hon. Member for Bristol, West (Mr. Cooke).

Mr. Hordern: By happy coincidence, this clause allows the Minister of State to give the answer for which he was perhaps searching on a previous new clause. However, if he is unable to give me a reply I shall table a suitable amendment to the clause later on. If it is convenient, however, perhaps he may give me a reply at this stage.

Mr. Robert Cooke: If the Minister is unable to reply, I shall join my hon. Friend and many Opposition Members in tabling an amendment that will enable us to discuss this matter later, subject, of course, to your selecting the amendment, Mr. Speaker.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 23

TAX TREATMENT OF CHILD BENEFIT

'(1) The Income Tax Acts shall have effect with the following amendments being amendments which—

(a) apply to child benefit the provisions applying to family allowances; and
(b) make other changes in those provisions,

(2) In section 8(2)(b) of the Taxes Act (wife's earned income relief) for the words "on account of an allowance under the Family Allowances Act 1965 or the Family Allowances Act (Northern Ireland) 1966" there shall be substituted the words "of child benefit".

(3) In section 24 of that Act (reduction of reliefs on account of family allowances)—

(a) in subsection (1) for the words "on account of an allowance under the Family Allowances Act 1965 or the Family Allowances Act (Northern Ireland) 1966" there shall be substituted the words "of child benefit in respect of one child" and for the words from "on account of two or more allowances" onwards there shall be substituted the words "of child benefit in respect of two or more children the appropriate reduction shall be made under the preceding provisions of this subsection in respect of the child benefit in respect of each child";
(b) subsection (2) shall be omitted;
(c) in subsection (3)(a) for the words "or child's special allowance" there shall be substituted the words "child's


special allowance or invalid care allowance";
(d) after subsection (3) there shall be inserted—
(3A) The said subsection (1) shall not apply to payments of child benefit in respect of a child in respect of which the individual to whom the payments are made is entitled to a guardian's allowance under the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975.

(4) In section 219(1)(b) of that Act (benefits chargeable to tax under Schedule E) for the words "on account of allowances under the Family Allowances Act 1965 or the Family Allowances Act (Northern Ireland) 1966" there shall be substituted the words "of child benefit".

(5) In section 530(2)(c) of that Act (meaning of "earned income") for the words "family allowances" there shall be substituted the words "child benefit".

(6) In paragraph 1(b) of Schedule 4 to the Finance Act 1971 (separate taxation of wife's earnings) for the words "on account of an allowance under the Family Allowances Acts 1965 to 1969 or the Family Allowances Acts (Northern Ireland) 1966 to 1969" there shall be substituted the words "of child benefit".

(7) Section 32 of the Finance (No. 2) Act 1975 (interim benefit for unmarried or separated parents with children) shall cease to have effect.

(8) The provisions of subsections (2) to (7) above (other than subsection (3)(c)) do not affect the operation of any of the enactments there mentioned in relation to any allowance or benefit payable in respect of a period before the appointed day for the purposes of the Child Benefit Act 1975 and the Child Benefit (Northern Ireland) Order 1975.'.—[Mr. Joel Barnett.]

Brought up, and read the First time.

The Chief Secretary to the Treasury (Mr. Joel Barnett): I beg to move, That the clause be read a Second time.

Mr. Speaker: With this we may take Amendment No. 13, in Clause 29, page 16, leave out line 37 and insert—
(2) In the year 1976-77 only, the allowances set out in section 10(3) of the Taxes Act (children) shall be amended as follows—".

Mr. Barnett: Perhaps it would be helpful if I briefly open on the new clause and then, with the leave of the House, deal with any points that might arise on the amendment.
The clause ensures that the same tax arrangements shall apply to the child benefits, which start in April 1977, as applied to family allowances—that is to say, that they should be subject to tax and clawback. The clause also extends

the present freedom from clawback enjoyed by the recipients of certain long-term social security benefits so that it shall apply to recipients of the new invalidity care allowance, which begins this month.
There are certain exemptions from clawback. Since it was first introduced, clawback has not applied to widowed mothers, pensioners and recipients of some other taxable social security dependency benefits for children. The reason is that the amount of dependency benefit is calculated on the basis that the recipients are in receipt of taxable family allowances, so that any further reduction in the net value of family allowance through clawback would make them worse off. Those people will continue to be free from clawback when child benefit replaces family allowances.
Under the clause, it has also been decided to extend freedom from claw-back to two other groups of social security beneficiaries. The first are recipients of the new invalid care allowance which is payable this month. The second group consists of recipients of the guardian allowance payable at the rate of £6·50 a week to someone who takes an orphaned child into his family. That is the objective of the clause. I hope later to deal with any other points that may arise on the amendments.

Mr. Kenneth Clarke: This new clause arises directly out of the Government's rather shabby decision to abandon—or, as they prefer to put it, postpone—the Child Benefit Scheme due to be introduced in April 1977. The new clause proposes that the new family allowance for the first child which the Government are introducing as a pale substitute for the Child Benefit Scheme should be subject to tax and clawback, just as family allowance is now.
It is rather startling to find the Government going ahead with this new clause at all, making the necessary legislative changes to introduce the substitute for a Child Benefit Scheme. That scheme has already been debated fully, and another debate on the merits would be outside the scope of this new clause. After a discussion on the merits, the Government declined to vote on an Adjournment motion because they could not carry the House. The Government's decision to


introduce family allowances to first children instead of introducing the child benefit found few friends inside or outside the House. The Government have not been able to command parliamentary approval in carrying it out. Yet without a parliamentary majority they carry on with a new clause to implement a change of policy that they have never presented to the judgment of the House.
One wonders whether in the course of the debate there will be the first hon. Member who is not sitting on the Treasury Bench to speak in support of the Government's decision to abandon child benefits and to substitute family allowances for first children. There is not a solitary hon. Member who has been prepared so far to make a speech or to vote in support of that shabby decision in the House a week or two ago.
A great deal of the draftsmanship of the new clause is taken up by making clear that child benefits are subject to the same arrangements as family allowances. A great deal of the drafting is necessary because the Government have chosen to call family allowances for first children child benefit.
This is a complete confidence trick. What is proposed by the Government and what the clause deals with bears no genuine comparison with the system originally proposed. A great deal of the verbiage on the Amendment Paper today is designed to cover up that fact and to use the name simply to deceive the public and to try to get the Government's proposals in line with their manifesto commitments. Without that, the Government would have been totally out of line with their election promises and the promises of the right hon. Lady the Member for Blackburn (Mrs. Castle) when she was Secretary of State.
6.45 p.m.
This debate gives us an opportunity to look at the effects of tax and clawback on family benefits and the proposed family allowances for first children. Subsection (7) of the new clause ends the temporary arrangements for the taxation and claw-back of the child interim benefit, the last interim stop-gap measure brought forward by the Government when they had to postpone the Child Benefit Scheme in April 1976. For 12 months, the child interim benefit will be subject to tax and

clawback. The effect of this has been to make a number of recipients of child interim benefit worse off by applying for the benefit than they would have been if they had not applied. I am thinking of that fair number of recipients who pay standard rates of taxation, who are subject to tax and clawback on the child interim benefit and who also qualify for family income supplement.
A single-parent family who applied for child interim benefit found that after tax and clawback the purported £1·50 was worth only 67½p to a standard rate taxpayer. The full £1·50 was taken as an increase in income for the purposes of assessing FIS, however. The result was that the child interim benefit, if claimed, was then worth 67½p but a FIS recipient lost 75p of the supplement. The recipient could also lose entitlement to free school meals. A substantial loss might be involved.
The Government always said that FIS was reviewed annually. So, in practice, the new scheme would not have this effect until 20th July this year, the date of the next FIS review. FIS is being reviewed from 20th July this year, and many one-parent families will be worse off if they continue to claim the child interim benefit. The Government acknowledge that, but do not intend to warn single-parent families that they will lose money if they continue to apply for child income benefit.
On 20th May I pointed this out to the Minister and asked him to make clear that those claiming child interim benefit should cease to claim it after July of this year if they paid standard rates of tax. The Under-Secretary said:
There would not be time, with only two months before it comes into effect, but we have given notice that CHIB would be taken into account in the operation of FIS in July. It will be up to the individual family. It is a complicated problem and many families will need advice but there is no advice which can be given generally by the Government or any organisation. However, I strongly recommend a pamphlet written by Mr. Lewis of the National Council for One-Parent Families, which sets out as clearly as I have seen in a document, official or unofficial, considerations which one-parent families should bear in mind in considering their attitude to FIS and CHIB and the uprating this year."—[Official Report, 20th May 1976; Vol. 911, c. 1903.]
The hon. Gentleman was admitting that the taxation of child interim benefit and


the interaction of FIS would make many single-parent families worse off if they continued to claim the benefit after July. He said that the Government could do nothing to warn them and that he was relying on outside bodies to tell them that they would be swindled out of money if they applied for the benefits that the Government had offered.
Subsection (7) of the new clause removes that but applies tax and clawback for the new family allowance from April 1977. In the light of our experience with the child interim benefit, we have to consider whether this is likely to happen again in the case of the new family allowances. It is my belief that, once more, many parents who claim the new family allowance will be worse off. If they are paying standard rate tax and receiving FIS, they will be financially better off if they are not deceived by the Government into claiming what appears to be an attractive innovation.
After the tax and clawback proposed in the new clause, the allowance for a first child will be worth only 30p in cash terms instead of the apparent £1 for every standard rate tax-paying family. If a family also claim FIS—because they are low-wage earners—they will lose 50p of the supplement and may also lose their entitlement to rent and rate rebates and other means-tested benefits.
Once more, there is an important category of people who will be worse off by claiming the new family allowance under the arrangements proposed in the new clause. They are the FIS recipients—lowwage earners with families, who are among the most deserving of the working poor. They may be misled by the Government's propaganda for their new scheme into thinking they will get additional help. My understanding, supported by experience of the child interim benefit, is that they will he worse off if they fall for the Government's propaganda and claim the allowance.
I hope that the Minister will also deal with what will happen if a person decides not to claim the new benefit. With the child interim benefit, the Inland Revenue automatically adjusted the tax codes of single parents on the assumption that they were claiming the benefit—even though they may never have heard of it

or decided not to claim it because they realised that they would be worse off. Unless the single-parent families were astute enough to send a note to the Inland Revenue saying that they were not claiming the benefit, they could have found themselves paying tax on a benefit which they were not receiving and which it would not have paid them to claim.
Will that happen with the family allowance for the first child next April? I assume that it will. I assume that every standard rate tax-paying family will receive a code adjustment on the basis that the new benefit is being claimed. Unless the Government revise their approach, a number of people may be worse off. Some might be treated adversely on the basis that they are claiming a benefit which, in fact, they are not receiving.
The Minister will no doubt attempt to defend the main principle of the Government's proposed change. I ask him to explain what went on in the Cabinet and what was and was not leaked. The Government are happily persevering without a parliamentary majority to put into effect the change outlined in the clause.
I hope that the Minister will also deal with the tax and clawback problems and the problems facing the working poor—those on low wages and in receipt of FIS. The Government now depend on this supplement, which was originally a temporary measure, as their main form of family support. Will they explain that many FIS recipients who pay the standard rate of tax will be made worse off by the appalling blunder of the Government in abandoning the Child Benefit Scheme?

Mr. George Cunningham: I hope the Minister will resist one of the invitations addressed to him by the hon. Member for Rushcliffe (Mr. Clarke) who wanted to know who said what to whom in the Cabinet discussions and elsewhere. I am not interested in that because the Cabinet will not decide this matter. It will be decided by the House. We should not be much concerned at the processes by which the Government reach their decisions, but rather with changing them when we disagree.
I have a lot of sympathy with much of what the hon. Member for Rushcliffe said, especially on the question of tax codes. Unfortunately, a lot of people


never bother to read the notifications they receive of code changes and, indeed, they might find it difficult to understand the wretched pieces of paper if they did read them. However, they ought to be encouraged to read them because if they receive a tax code which reflects an allowance that they do not propose to claim, they can appeal and have the code altered.
The new clause will make the child benefit taxable and subject to clawback in a similar way to family allowances. There is almost certainly in this House a majority which dissents from that proposition. If there were a genuine vote—I do not say a free vote, because all our votes are free—on that propostion, it would not be carried, but it will carry tonight because the Opposition Front Bench are not going to march. If they were marching and voting on this issue the clause might not pass. I hope that the House realises that if this proposition is carried and the child benefit is made taxable and subject to clawback, that will have happened for one reason—that the Opposition are not prepared officially to put their votes where their mouth is.

Mr. Patrick Jenkin: The hon. Member is asking the Opposition to do a rather strange thing. He wants us to treble the cost of the new allowance by voting down the tax and clawback provisions without any assurance that the child tax allowance will be replaced by a new, enlarged benefit. It would be ridiculous to vote down one feature because we dislike the whole scheme.

Mr. Cunningham: I understand that, but we have my amendment which would save £300 million. However, I accept that the Opposition are officially supporting the Government's proposition which will be carried tonight.
My Amendment No. 13 is a central part of the child benefit argument. In this year's Budget it was suggested that the children's tax allowance should be increased to £60 per child. It is the normal practice to increase such allowances, not for any specific year, but for all time—till the next amendment of the allowance. My amendment is asking for something which is not unique, but which is very unusual—that the increase in the allowance should be provided only

for the current year and that it should cease next April when we should revert to the previous rate.
There are two parts of this child benefit business—extra cash payments and taking away tax allowances. Any fool can make extra cash payments as long as he can get his hands on the money to do it. The difficult part of the exercise is the taking away of the tax allowances.
Some operations are difficult, almost impossible, but become terribly easy if they are done gradually. I am a Fabian by nature and believe that the main thing is to get started and keep going. The tortoise gets there in the end, when many faster animals never leave the starting line because someone shoots them dead before they get going. I am in favour of the tortoise approach. It is not as if the House normally operates at lightning speed. The main thing is to get started and keep going.
7.0 p.m.
Here we have an opportunity to take away roughly a fifth of the tax allowances next April. The gain to the Revenue would he about £300 million, more than enough to make the proposed child benefit, which as the hon. Member for Rushcliffe said, is really family allowances in disguise, into a genuine child benefit which is not taxable and not subject to clawback.
There is also a procedural reason why we should pass the amendment. If the Bill is sustained in the form in which it is introduced by the Government it will not be possible for any Private Member or any Opposition party to move for the tax allowances to be reduced in next year's Finance Bill. Because of the daft and decadent rules of this establishment, it is not possible for anybody except a Minister to move for an increase of taxation or of expenditure. I do not want to lose the option to move for such a reduction next year.
By providing for the increase to apply only to the present year, I not only make it possible to use £300 million next spring to shift over to child benefits but, at the very minimum, to retain a procedural option to operate on that issue next April, without having first to bludgeon the Government into creating an opportunity to do so by asking them to table a motion to that effect.
I hope that the working party between the Labour Party and the TUC, which has been well publicised in the past few weeks, will find means of making a gradual but not too slow transition from tax allowances to child benefits, the kind of transition which the Government, unfortunately, did not find for themselves.
I hope that we shall get the Government and the whole House off the hook on this business and get progress started again. It is as part of that operation that I tabled Amendment No. 13, to keep the procedural option available and to free £300 million to begin the switch next April. I hope that on that basis the Government will, no doubt reluctantly, accept the amendment, knowing full well that if they do not it will still carry into statute by the decision of a majority of the House.

Sir George Young: Having strayed into the deliberations on the Bill a little earlier I feel that the Government are giving more favourable tax concessions to trees and works of art than to children.
I wish to speak briefly on Amendment No. 13, which is an all-party amendment, the impact of which, if it is not subsequently interfered with, will be to ensure that child benefits as originally envisaged are phased in next year. I believe that to be the wish of the majority of hon. Members. I do not think that the Government strategy embodied in New Clause 23 would get very far if there were a free vote.
Basically, the issue is how one tackles family poverty. What is disturbing is the complete absence of any strategy from the Government in the past two and a half years to tackle the growing problem of poverty. We are talking about switching resources to families. The amendment is not about switching money from the wage packet to the poorest. It is not about providing incentives to work. It is not about an incomes policy. It is about getting resources to families, who constitute a relatively small minority of the population. About three-quarters of all children are in one-quarter of all households; 50 per cent. of all children are in 13 per cent. of all households.
Any picture of family responsibility being borne equally is distorted. Households with children have had a raw deal over the past 15 years, for two reasons. Firast, tax allowances have not been revalued in line with other tax allowances. Secondly, many families have failed to have enough income to claim the tax allowances anyway.
The House would do well to look at how the tax allowances have changed since 1960, seeing how the single and married persons' tax allowances have increased and comparing them with the age-related child allowances. Taking 1960 as 100 the single persons' tax allowance has risen to 525 this year; the married persons' allowance has risen to 452; but the three age-related child tax allowances to only 300 for the under-elevens, 268 for the 11-year-olds to 16year-olds and 243 for those over 16. That means that the age-related allowances have risen about half as much. There has been a progressive discrimination against families with children and a corresponding increase in the part of the tax burden falling on their shoulders.
The second point relates to those families with insufficient income to receive the tax allowances anyway. A year ago there were 500,000 families with insufficient income to benefit from the tax allowances and 220,000 with insufficient income to make full use of the allowances. That means that there were about 2 million children not receiving through the tax system the support which was aimed at them.
I think that most hon. Members saw the child benefit scheme as a strategy for overcoming both those problems, first by converting the allowances into cash and secondly by over a period increasing them to their relative level of about 16 years ago. The Government have abandoned that strategy.
The amendment represents a last-ditch attempt to get the Government to reverse their posture and put them back on target. I think that the reason why they have abandoned the strategy is not to do with public expenditure, because they have produced a very expensive scheme. It is nothing to do with trade union resistance, because trade unionists are sensible enough to see the logic of the child benefit


strategy. It is because of a total failure of co-ordination between the two Departments concerned, the Treasury and the Department of Health and Social Security. Family allowances come under the DHSS and the tax allowances come under the Treasury. To convert them into a combined child benefit requires a certain amount of co-ordination of approach and a determination to see the matter through. They have been totally absent over the past two years. That is why the scheme has lapsed. We see Ministers from the two Departments sitting together amicably on the Government Front Bench, but we wonder how often over the past two years they have talked about ways to tackle family poverty and implement the child benefit scheme.
I should like to give one example of the failure to co-ordinate. The child benefit scheme could never have been introduced at nil cost, giving £40 million to families too poor to receive the tax allowances. It cannot come solely from other families with children. It must come from the taxpayer, but the Treasury has never put any money in the Estimates for the scheme. It has failed to understand the implications of the strategy being adopted by the DHSS.
Likewise, the Bill only at the eleventh hour contained amendments relative to the Child Benefit Act of last year, although we were promised that this year's Finance Bill would have relative amendments when it was published. We have had to wait all this time for the appropriate amendments.
The Government should have introduced the child benefit scheme last year. That was when the child tax allowances reached their all-time low in relative value, and when the transitional problems and the problems of the wage packet would have been at their least. That is what we tried to get the Government to do in vote after vote in Committee and on the Floor of the House, but we failed. It is all very well for Labour Members now to try to save the child benefit scheme. If nine of them had voted differently about a year ago, implementation would have happened in April 1976. A year ago was when we needed their support.
I hope that the Minister will outline his Government's strategy for tackling family poverty and respond to the amend-

ment, which still offers the Government an honourable way out of their dilemma.

Mrs. Barbara Castle: The hon. Member for Ealing, Acton (Sir G. Young) is typical of his party. He is very vigorous in words, but remarkably lethargic in deeds. We are used to this posture by the Conservative Party on child benefit and on everything else. The picture they paint of Conservatives straining at the leash to introduce a child benefit scheme is so ludicrous. When we look at their history on this matter we realise that it is something which we must dismiss.
The simple fact is that the failure to introduce child benefits last year was not due to Treasury meanness, or lack of coordination between the two Departments —not that the Treasury ever co-ordinates with anyone—but to the impossibility of introducing the scheme administratively. That is a fact, and I say it as someone who is a severe critic of the Government in their posture on the child benefit scheme. The scheme could be administratively introduced now, but is not going to be. This is a very unhappy moment for many of us on this side of the House.
The debate on New Clause 23 is a debate on the sum total of a disastrous reversal of Government policy. It is nothing to do with public expenditure, or the trade union movement. It is just the failure of political will on the part of the Government, and it is nothing short of a tragedy.
My hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham), who said that he was a good Fabian, which I am not, claimed that the main thing was to get started and to keep going, but he knows that what we are presented with in this new clause, and what the Government propose on child tax allowances, are two major steps in exactly the opposite direction from the one in which we should be moving. We are being asked to legislate on this simple fact tonight.
The first step in the wrong direction is the increase in the child tax allowance which thus increases the transfer cost of introducing child benefit. It is increasing that by 40p per week per child at a cost of £300 million. This is a deliberate step


to put an obstacle in the way of introducing a child benefit scheme at a time of economic stringency. It is a costly step in the wrong direction and is using money which could have fertilised an effective child benefit scheme if the will had been there.
The second step in the wrong direction is the extension of family allowances to the first child. New Clause 23 is proof positive of what we have always said—that the Government's extension of £1 a week to the first child is not, and never has been, a child benefit. It is a family allowance, subject to income tax and clawback. We can at least ask the Government to drop the hypocrisy of pretending that this is a child benefit, because it is nothing of the sort. It is a pathetic and dangerous alternative.
Amendment 13 limits the damage of the first steps in the wrong direction by putting a time limit on the increase in the child tax allowance. As my hon. Friend the Member for Islington, South and Finsbury said, it means that next year we shall be free to start putting this disastrous Government policy into reverse. Therefore, I hope that the Government tonight will accept this amendment, and thus free themselves, the House, and us Back Benchers, from the shackles they would otherwise put on us, and from the rigidity of policy into which they would otherwise force us.
7.15 p.m.
There is a working party due to meet for the first time tomorrow, comprising the National Executive of the Labour Party, the trade union movement, the Parliamentary Labour Party, and the Government. This working party will look at the present situation on child benefit and will consider how we can carry the scheme into effect during the lifetime of this Government, even though it may involve some phasing.
That is what is important—not what the Prime Minister threatened us with when he told us that the child benefit scheme could not begin before 1979 at the earliest. We challenge that tonight. I believe that if the Government participate in the meeting tomorrow in the spirit of moving forward towards the introduction of a real child benefit within the lifetime of this Government, taking

account of public expenditure difficulties and pay policy difficulties, then we may well see the restoration of their political will.
Amendment 13 will restore our financial flexibility. This is an essential part of enabling us to find a way forward. When we have done this next year, we shall have to deal with the second element of the policy which goes in the wrong direction, the one which is embodied in New Clause 23.
It is tragic that it is not possible for the House to throw out this family allowance formula tonight. The Government have the advantage of dictating the procedural parameters within which we must work. Therefore they can come here and tell us the consequences which would occur if we failed to carry the new clause. But we were not the architects of this reversal, and if there were a clear way of saying either "Yes" or "No" to the Government's proposals as a whole, I am convinced that the overwhelming majority of hon. Members would say "No".
Therefore, we ask the Government tonight to have second thoughts—to begin the reform of character which is necessary to restore their good conscience, and to accept Amendment No. 13. They should take on board the fact that when the working party produces its solution and its formula we shall expect the Government to embody this in legislation next year.

Mr. Peter Bottomley: The Minister can watch his front row now, instead of his back. The proposals the Government have put in the Bill have the effect not of raising the benefit floor for families but of pouring more cement on to the poverty trap ceiling.
Most people in this House would like to see the Government take the easy way out and use the Child Benefit Act which was passed last year with support from all sides. All of us have the basic interests of the poor families of this country at heart. This is not to say that the Government cannot be criticised for failing to bring in a proper level of child benefit, child tax credit or negative income tax, call it what we will.
Two things stopped it from being introduced earlier. One was the result of the 1974 election, and the second was the inability of the Department of Health and


Social Security to implement the Child Benefit Act last year. The right hon. Member for Blackburn (Mrs. Castle) very kindly spared us the stories of high alumina cement, but those who write the history of family policy of the middle 1970s will probably put down the apparent recalcitrance of some of the Department of Health and Social Security officials to the way that one of the pension increases was forced through in a great rush, making it impossible for the then Secretary of State to get the co-operation of the officials—or so we were given to understand—and bring in child benefit, when it could have been brought in, last year.
I find it very sad, when we talk about distributing a certain amount of money, that we cannot discuss it openly, and that the Government do not take soundings on both sides of the House, in the trade union movement and among the family organisations to discover whether the Government's attitude towards take-home pay and the pay packet or family income is correct.
The one thing we have failed to have from the DHSS or the Treasury, since the Government climbed down on child benefit, is any realistic explanation of why the decision was made. I do not want to go into the question of leaks, and I shall not, but I hope the Chief Secretary will be able to explain why the decision was taken, and what obstacles there are in the Government's mind to reversing the decision.
The view of most of us is that virtually any scheme the Government may have introduced, at the cost of £95 million, could have been used to give greater help to those who need it. If the right hon. Gentleman can explain that this is not the case, we shall welcome an explanation, even now. I hope that, if the Government cannot introduce an amendment to the Bill this evening to bring in child benefit, they will recognise that there will be widespread support in all parts of the House if they care to do it in the next nine months before April 1977.
If the previous Secretary of State for Social Services had had the backing of her Cabinet colleagues it would have been possible for her, before she left office. to have announced what the rate of child benefit would be. This could

have been done before the Government suddenly decided there was not sufficient in the contingency reserve, or before the White Paper concerning public spending was brought out. The right hon. Lady could then have committed the Government to the introduction of child benefit.
I find it rather strange that while Socialist planning made it possible for the Labour Party to go into the February 1974 election and the October 1974 election with a commitment to child benefit suddenly, a month or two before we expected to hear the full details, we heard that the Government had backed down on their commitment.
We have seen Governments in the past committed to raising family allowances or introducing family benefits and then backtracking on them. We have seen family income supplement introduced—a poor substitute for the last Government's opportunity to bring in higher family allowances in the period 1970 to 1974. We have seen the same thing in the two and a half years of this Government.
We have failed to see any discussions about this between the two halves of the Labour movement. We have had pay policies giving increases of up to £6 a week, followed by £4, for people at work, without any proper discussion of the impact of that on Government spending. The £6 a week policy was brought in in August last year at a net cost to the Government, I estimate, of about £7,000 million, with extra inflation for private firms in meeting their extra pay bill. There was apparently then no consideration of spending, say, £500 million on raising family allowances or bringing in child tax credits or child benefits. An extra £500 million last year could have brought in a child benefit scheme which would have had plenty of extra for all families, no matter what their income tax position or their earnings position. Again this year, when we have a pay policy which will give most of us £4 a week extra for being at work, the implications of this in regard to Government spending must be at least another £5,000 million. and yet we find that the Government can only find £95 million.
I do not intend to go on criticising the Government this evening, because I want to make it possible for them to use their slightly shabby working party to come


forward with a proposal which can be accepted by the whole House. If by Thursday morning, the day after the working party has met, we do not see a headline saying that the Government have agreed to meet the views of this House, I think the working party itself will be discredited. It will mean that the Government are not paying attention to their own Back Benchers, are not paying attention to the Opposition, and are not paying attention to the decision the House made when the Child Benefit Act was passed. It will mean that they are certainly not giving sufficient attention to the 7½ million families and their 14 million children in this country.
I put on record now that I think one of the reasons I managed to wipe the floor with the Labour Party in my by-election last year was that I went all out on the importance of having proper representations for the family unit at home, and not having the House of Commons dominated by the representatives of those at work. My vote went up and the National Front vote was far lower than it has been in subsequent elections.
If hon. Members on both sides are willing to do what they believe to be right for the children and for the mothers of this country they will discover that we we can get away from the inflationary pay claim situation and back to having proper justice for the children and for the mothers, whether at work or not and whether single or not, in this country.
If the Government fail to change their mind and fail to produce a convicing explanation, they will, in my view, fail to represent the working people of this country and they will show that the Labour Government's policy is based solely on the person at work. This will lose the Government the next election.

Mrs. Helene Hayman: I do not intend to follow the hon. Member for Woolwich, West (Mr. Bottomley) through all the paths he has taken this evening, nor do I intend to reiterate my reasons for supporting a full implementation of the Child Benefit Scheme and for thinking that the Government were sadly misguided in their decision to ditch the scheme.
I want to speak simply against the new clause that the Government have intro-

duced and in favour of the amendment, because it is very important this evening that we make it clear as a House of Commons that we wish to maintain this argument and allow ourselves the option of voting again on these issues and on the whole question of the Child Benefit Scheme.
Earlier in the debate, analogies were made with tortoises. I heard my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) say that the tortoise was going backwards. In the context of the House of Commons, it may be a tortoise when it goes forward but the Treasury is a veritable hare when it goes backwards. The effect of having the new clause and not the amendment would be to put us back very disastrously in the battle on child benefit.
I do not feel that it is good enough for a Government who have said that they will be open-minded on the question of whether it is possible to implement child benefit, and who have set up a working party, to expect us to accept that in good faith when bit by bit we are being hemmed in by provisions in the Finance Bill and by Regulations which are to be brought before the House next Monday. We find ourselves trapped.
It is important that we as a House of Commons should be allowed to keep our options open on the whole issue of how we finance family support, and what measure of it we take from the realm of income tax relief and what measure we take in terms of cash benefit.
If the Government do not accept Amendment No. 13, we shall be disastrously limiting our options for the future. It would be a mistake politically as well as a mistake of social policy so to limit our options. As a measure of faith towards those of us who argue that their initial decision was wrong, and as a measure of faith towards the working party which they were instrumental in setting up, the Government should at least be willing to allow the option of changing their mind in the future. For that reason, I hope that my right hon. Friend the Chief Secretary will not force his hon. Friends into the Lobby against him. Being a reasonable man he will, I hope, accept our rational argument and the amendment.

7.30 p.m.

Mr. David Penhaligon: I never cease to be amazed by how frequently I speak in debates of this nature when, to be candid, I do not understand what we are doing. I suspect that I am in the majority in the House, but I am one of the few with courage to admit it.
I will set out the position as I see it and, if I am wrong, I hope that the Minister will correct me. I instance a family which gets interim benefit and family income supplement and pays income tax. The £1 allowance for the first child could in some circumstances be lost in the following way: 50p off the family income supplement, 35p in tax and another 35p in clawback. That means a net loss of 20p a week. That situation has been mentioned several times in the debate and in leaflets that hon. Members interested in this subject have received through the mail. I shall look forward to the Minister's reply on that point. Is that simple calculation correct?
A single-parent family of two, three or four children which receives a family allowance for the new child will have its income reduced. Perhaps we should help to solve the problem by telling those families to disclaim the family allowance. It would appear that a two-child family by disclaiming the family allowance of £1·50, could in real terms increase its income. I do not understand it, but I look forward to hearing the Minister's reply. Perhaps the Minister will tell us how much the Government save by this 120 per cent. tax rate on families which claim family income supplement.
I never cease to be amazed by the sudden realisation by some people that the transfer of income from the husband to the wife under the child benefit scheme results in a loss of income to the husband. Those of us who have attended debates on this subject have recognised that problem for a long time.
The Government tell us that at this precise moment, because of the pay policy, the economic climate is not suitable for the introduction of the child benefit scheme. The implication is that next year or the year after there will be a change that will allow the scheme to be introduced. I can never see the day coming when we shall be able to award large enough pay rises in a single year to enable that problem to be overcome.
The Prime Minister suggested that we might do something about it in 1979. Is he prophesying that in 1979 there will be a rate of inflation of about 30 per cent.? Anything less than a 30 per cent. rate of inflation would mean, with the introduction of the scheme, that many people would have a substantial reduction in their take-home pay.
What economic circumstances does the Minister foresee that will make possible the introduction of the scheme? If he is unable to tell us that, we must accept the tortoise method outlined by the hon. Member for Islington, South and Finsbury (Mr. Cunningham). That appears to be the only way by which the scheme can be introduced.
It is a sad reflection on our democracy that one of the few proposals upon which all the party manifestos were agreed has not been implemented, yet many measures supported only by a minority get on the statute book. To those who are cynical about our politics—I am one—that merely increases the cynicism. It also increases the disregard in which the public hold the House.

Mr. Ron Thomas: I never cease to be amazed by the hyprocrisy of the Opposition whenever we talk about public expenditure or family provision. When the history of family provision comes to be written, all that will appear as the contribution of the Tories is a footnote on page 500. That will be sufficient to deal with their contribution to the alleviation of family poverty.
I appeal to my Front Bench to accept Amendment No. 13. Like my right hon. Friend the Member for Blackburn (Mrs. Castle) I believe that the Government took a step back which the majority in the Parliamentary Labour Party much regret.
One of the main reasons why I support the child benefit scheme is that for the first time it provides a meaningful payment to the mother. That is essential. For the first time the mother in the family receives an income which she can use for the benefit of the family. At this time, when we so often talk about equality, it was a slap in the face for mothers when the Government decided not to go ahead with the scheme.
It is an insult to the intelligence of trade union members to say that they do not realise exactly what the scheme means. That is certainly not the reaction of my trade union friends.
I appeal to my right hon. Friend to accept Amendment No. 13 in the hope that it will go some way to meet the disillusionment and anger felt by many active party supporters.

Mrs. Margaret Bain: I rise briefly to state my party's sympathy for Amendment No. 13. Before giving my reasons for supporting it in a Division, I wish to take up one point in the speech by the hon. Member for Bristol, North-West (Mr. Thomas). I wish that hon. Gentlemen would remember that there is not just one opposition party: there are several opposition parties in the House.
The Scottish National Party's record on cut-backs in public expenditure is clear. We are totally opposed to public expenditure cut-backs. We have supported the child benefit scheme throughout. I ask hon. Members not to accuse the SNP of hypocrisy. We agree with the accusation of hypocrisy against the Conservative Party.
We recognise that Amendment No. 13 is a tactical and procedural amendment. It is not perfect and it does not do everything we want. It is usually the procedural amendments that are the most important. We support the amendment because it gives heart to those of us who are genuinely concerned that the child benefit scheme has not been brought forward. It encourages us to think that next year it will finally get on the statute book.
My party's support for this concept is well known. The SNP's record throughout the whole child benefit debate is available for anyone who cares to examine it. We support the amendment because we feel that it will bring some help eventually to poor families. If we do not pass the amendment, or if the Government do not accept it, we shall only bring this place into even greater disrepute. People are fed up with hearing the empty promises of politicians and seeing nothing come forward at the end of the day.
I hope that the Government will accept the amendment not merely so they can consider it and discuss its possibilities,

but by way of implying a categorical assurance.

Mr. D. E. Thomas: I have always failed to understand how the Treasury is able to classify additional spending on benefits as public expenditure while not classifying tax allowances as public expenditure. I hope that the Minister of State will educate me on that matter when he replies.
I shall briefly highlight what is happening and what has happened as between tax allowances and family allowances. We have always realised that child tax relief has been most valuable to those with higher incomes. However, under the Government's policy family allowances are set at £1·50 and the total benefit, including the £1 allowance for the first child, will be a lower percentage of average industrial earnings in April 1977 than in 1968. Tax allowances are naturally of no value to those below the tax threshold, and there are some 200,000 families in that position who will not benefit from child tax allowances.
The Government substitute for the child benefit scheme that we have been asked to endorse in the new clause fails to restore the 1968 value of family allowances. They have decreased in value while child tax allowances and tax relief for high income families have increased. At the same time, the tax burden, especially for families just above the tax threshold and for middle income families, has increased. Families with a low income, families dependent on family allowances and families unable to enjoy the full benefit of the child tax allowances are in a worse position under this Government than in 1968. I endorse the amendment.
I hope that the right hon. Gentleman will not merely give us some general commitment that he will consider these matters. I hope he will say quite clearly that he intends to accept the amendment. If not, and if the amendment is not pressed by certain sections of the House. there are other parties that might press the amendment to a Division.

Mr. David Howell: We support Amendment No. 13 because we think, as hon. Members on both sides of the House have said, that this is a small


attempt to try to rescue the Government from what most of those who have spoken in this debate recognise to have been a complete and serious failure of policy.
I agree with those who have said that the use of the word "benefit" to describe the additional family allowance is a most pathetic cover-up. I agree with the right hon. Member for Blackburn (Mrs. Castle) that, if nothing else, we should be spared semantic juggling. We should call a family allowance a family allowance and not pretend that in some way a benefit is being created.
This has been a very good cross-party debate. I am sorry that a slight note of bitterness crept into the comments of the right hon. Member for Blackburn. I think that we understand her problems and feelings. It might be argued that when she feels as she does now it is better to stand well back and let her take an unimpeded swing at her own Front Bench. That is, of course, what she is doing.
7.45 p.m.
We do not have anything to apologise for—indeed, the Conservative Party has a good record. It should be argued that if Labour Members had acted a little differently, we should be much further forward on the whole child credit issue. If the Labour Government had maintained the co-ordination that existed between the Treasury and the Department of Health and Social Security when the Green Paper was written on tax credits under the Conservative Government, if the Labour Government had not been quite so eager to throw over the whole tax credit system when they came into office, and if Labour Members had supported my hon. Friend the Member for Ealing, Acton (Sir G. Young) last year, we should all be further forward instead of rapidly falling backwards, as the hon. Member for Welwyn and Hatfield (Mrs. Hayman) has said. If we had moved further forward, that would have been to the benefit of both sides of the House.
However, it would be absurd to vote down the clause. I do not think it is fair that we should be expected to take that course. If we did, we should leave a yawning gap and we should have no guarantee that a proper benefit would be brought in to fill the gap. We shall not

vote down the clause, and we shall support the amendment.
At the same time, we are right to say that this is an awful example of the drift of Socialist social policy. It is a drift so far backwards that Labour Members and others are yearning for that happy day when we may return to the level of family support attained under the Tories.
If Labour hon. Members want to compare social records or write history books, they will find where the performance lies in terms of family support and how policies and priorities have changed again and again. They are changing and they will continue to change towards the families of the working poor and those in need. That is what has happened over this whole area, and that is why we do not accept the strictures of Labour Members.
We accept the amendment as going a little way forward, or perhaps holding back the drift in Socialist social policy before it becomes a complete shambles.

Mr. Joel Barnett: The remarks of the hon. Member for Guildford (Mr. Howell) towards the end of his speech about Tory policy were those that rightly led my right hon. Friend the Member for Blackburn (Mrs. Castle) to say what she said. That is well understood by my hon. Friends. I say at the outset that coordination between the Department of Health and Social Security and the Treasury was excellent when my right hon. Friend was in charge. I have never disagreed with any Minister more pleasantly than I did from time to time with my right hon. Friend. That excellent co-ordination has continued ever since.

Mrs. Audrey Wise: Is my right hon. Friend saying that the Treasury consulted the Department of Health and Social Security about the changes that it proposed for child tax allowances, which pre-empted the whole child benefit situation?

Mr. Barnett: I am saying that all these matters were discussed with the Department of Health and Social Security and other Departments in the Cabinet.

Mr. Patrick Jenkin: Oh!

Mr. Barnett: I do not know what happened when the right hon. Gentleman was Chief Secretary. I was talking about


co-ordination between the Treasury and the Department of Health and Social Security. It has been excellent and it is excellent.
The amendment in the name of my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham), if accepted, would keep the £300 child tax allowance for the child under 11. It would keep it for 1976–77, and it would revert to £240 from April next year. Similarly, the allowance for the older child would be reduced by £60. My hon. Friend made it clear, as did my hon. Friend the Member for Welwyn and Hatfield (Mrs. Hayman) and my right hon. Friend the Member for Blackburn, that their purpose is not in any way to reduce the resources made available to families. Indeed, they would like, as I would, to make more resources available to deal with the problem of family poverty than so far we have been able to provide. I entirely accept their purpose.
My hon. Friends have not said that they are seeking an increase this year in the total amount available for family poverty. That was not their purpose. My right hon. Friend the Chancellor of the Exchequer made clear in his Budget statement that he regarded the increase in child tax allowances this year as part of the compensation offered to the TUC in the negotiations on the acceptance of the low pay limit. Given the agreement with the TUC, it is right to allow that allowance to stand when we were dealing with net take-home pay.
The hon. Member for Ealing, Acton (Sir G. Young) made the point well about the way in which tax allowances have not increased sufficiently over the years so that the family has been dealt with less well than single people in terms of tax allowances. There is a good case for increasing net take-home pay to increase it for the family more than for others.
My hon. Friends have made clear that their purpose is to leave the door open for discussions during this year with a view to seeing whether it is possible to divert the £300 million cost of the increase in the child tax allowances to make a start in the movement from wallet to purse. There is no disagreement on this side of the House about the need to consider that matter carefully. Discussions will be started shortly between the

TUC and the joint working party comprising the Government, the TUC and the Labour Party. I hope that it will be possible to come to some conclusions on how to deal with the matter in the coming year.
My right hon. Friend the Member for Blackburn pleaded with me to free her from her shackles. That is a plea I can never resist. I am always happy to free my right hon. Friend, or any other of my hon. Friends, from any shackles.
I am prepared to accept their amendment in the spirit in which it was moved. We shall be joining with my right hon. and hon. Friends and representatives of the TUC in an examination of what further steps it might be possible to take. But I must make it clear that the final decision will remain with the Government. I emphasise that there can be no question of our devoting additional net resources to the child benefit scheme next April. The House is aware of the constraints on public expenditure, but we will consider whether there is any further scope for moving in the direction in which my hon. Friends wish to move. That is why we shall be having the discussions.
It will be necessary for the Inland Revenue to be told what levels of child allowances it must include for next year when it comes to calculating the annual codes this year. I hope that it will be possible to look at the matter urgently, because in that sense there is no time to be lost in coming to a conclusion. I am happy to assure my hon. Friends that I can accept the amendment, which will give us time to look at further steps in the direction that my hon. Friends seek to move, and I recommend the House to accept the amendment.

Mr. Kenneth Clarke: Mr. Kenneth Clarkerose—

Mr. Deputy Speaker (Sir Myer Galpern): The Minister has already sat down.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

Mr. Kenneth Clarke: On a point of order, Mr. Deputy Speaker. Is it in order for the Minister to move a new clause, to sit and listen to the debate which deals with taxation and clawback and which


affects a large number of people, to look as though he is making notes and nodding wisely, and then to refuse to make any reply? It is important because a large number of families may be worse off next year as a result of these provisions.

Mr. Deputy Speaker: The Chair is not responsible for a Minister's speech.

New Clause 24

CAPITAL GAINS: COMPULSORY ACQUISITION OF AIRCRAFT AND SHIPBUILDING SHARES

(1) This section has effect where, in pursuance of any enactment to which this subsection applies, gilt-edged securities are exchanged for shares in a company and, immediately before the exchange, those shares are owned by another company—

(a) which is a member of the same group of companies as the first-mentioned company; or
(b) which is a member of a consortium by which the first-mentioned company is owned.

(2) Subsection (1) above applies to any enactment providing for the compulsory acquisition of shares in companies engaged in manufacturing aircraft or guided weapons or in shipbuilding or allied industries.

(3) In any case in which this section has effect the company owning the shares immediately before the exchange may by notice in writing given to the inspector within four years after the exchange, elect—

(a) that section 49(3) above shall not apply to the exchange; and
(b) that section 33 of the Finance Act 1965 (replacement of business assets) shall have effect in relation to the disposal on the occasion of the exchange as if the shares were assets falling within the classes listed in that section and had, throughout the period of ownership been used and used only for the purposes of a trade carried on by that company.

(4) For the purposes of this section—

(a) two companies shall be deemed to be members of a group of companies if one is the 75 per cent. subsidiary of the other or both are 75 per cent. subsidiaries of a third company;
(b) a company is owned by a consortium if all of the ordinary share capital of that company is directly and beneficially owned between them by five or fewer companies, and those companies are called the members of the consortium.

(5) Subsections (6) and (7) of section 49 above shall apply in relation to this section as they apply in relation to that section.'.—[Mr. Joel Barnett.]

Brought up, and read the First time.

Mr. Joel Barnetta: I beg to move, That the cause be read a Second time.

Mr. Deputy Speaker: With this, we may take the following amendments:

(a) in subsection (1), after first "by", insert "anindividual or".
(b), in subsection (3), after first "effect", insert "the individual or".
(c), in subsection (3), leave out first "exchange" and insert "issue of the gilt edged securities".
(d), in subsection (3)(a), after "to", insert the whole or part of ".
(e), in subsection (3)(a) at end insert:
'that the exchange shall be treated as not involving any disposal of shares by that company, and where such an election is made, to the extent that a subsequent disposal of the whole or part of the gilt-edged securities is made by that company for the purpose of the acquisition of a qualifying asset and the acquisition takes place or an unconditional contract for acquisition is entered into in the period beginning on the date referred to in subsection 6 of section 49 and ending three years after the date of the subsequent disposal, the disposal of the qualifying asset and not the disposal of the gilt-edged securities shall be treated as a disposal and for this purpose "qualifying asset" means an asset (including goodwill and shares or securities acquired as investments) which is, or is an interest in, an asset to be used or held either for the purposes of a trade or business carried on or to be carried on by the company from whom the shares referred to in subsection (1) above were compulsorily acquired or by a member of the same group of companies as that company, or for any other purpose for which the shares were held prior to their compulsory acquisition'.
(f) leave out subsection (3)(b).
(g), in subsection (3)(b), at end insert:
'or,
(c) paragraph 6 of the Seventh Schedule to the Finance Act 1965 shall apply to the transaction as though the gilt edged securities had been issued by a company acquiring control of the first mentioned company'.
No. 45, in page 30, line 24, leave out Clause 49.
No. 46, in Clause 49, page 31, line 13, at end insert:
'but, to the extent that the disposal is made for the purpose of the acquisition of a qualifying asset and the proceeds thereof are applied in such acquisition within three years thereafter, the disposal of the qualifying asset and not the disposal of the gilt-edged securities shall be treated as a subsequent disposal for the purposes of this paragraph, and for this purpose "qualifying asset" means an asset (including good will and shares or securities acquired as investments) which is, or is an interest in,


an asset to be used or held either for the purposes of a trade or business carried on or to be carried on by the person from whom the shares referred to in subsection (1) above were compulsorily acquired (or if that person is a body corporate, a trade or business carried on or to be carried on either by that body or its wholly-owned subsidiary) or for any other purpose for which the shares were held by such person prior to their compulsory acquisition.'
No. 47, in page 31, line 13, at end insert:
'Provided that neither this paragraph nor subsection (2) above shall apply where any gilt-edged securities are within three years after their issue disposed of by a body corporate by way of distribution thereof to its members.'

Mr. Barnett: The new clause gives relief to certain companies in the aircraft and shipbuilding industries by deferring the charge to tax on capital gains arising by virtue of Clause 49, which brings into charge gains on any nationalisation where the Government issue gilt-edged securities in exchange for shares compulsorily acquired. The relief is given by treating such gains as though they arose from the disposal of qualifying assets for the purposes of Section 33 of the Finance Act 1965. Shares are not otherwise qualifying assets. Section 33 of the Act lists the qualifying assets.
Where the company so elects within four years of the compulsory acquisition of the shares, the gain which would otherwise arise on the disposal of the gilt-edged securities issued for those shares can be rolled over into any qualifying replacement assets, subject to the normal rules of Section 33.
That, broadly, is the nature of the new clause. I shall be happy to deal with the amendments when we come to them.

Mr. Nigel Lawson: I hope that the Chief Secretary will address himself to this matter at considerably greater length, as a number of important issues are involved in the new clause, the amendments to it and also the amendments to Clause 49, which are being grouped with this new clause.
We had a debate in Standing Committee on Clause 46, as it then was, dealing with the treatment for tax purposes of the compensation to be paid by the Government to the companies owning the shipbuilding and aircraft subsidiaries that are to be nationalised, which started at about 3.20 in the morning and con-

tinued for about one hour. We have here a new clause produced as a result of that discussion, but it is far from satisfactory both in equity and in certain particular considerations which I shall outline as briefly as possible.
It might be helpful if I deal first with the specific amendments. The purpose of Amendment (c) is to give more time for the companies to decide what they have to do. Under the new clause, they are given four years after the date of the notional exchange. I suggest that it should be four years after they actually receive the gilt-edged securities. That is necessary because the companies have a very difficult choice as to how they use the profits and, as the Chief Secretary has indicated, there may be a considerable further delay before they received the securities. This is a minor amendment but it should not he disregarded.
8.0 p.m.
Amendment (d) seeks to give companies flexibility in what they propose to do with the proceeds. As I understand the clause, companies are able to elect what they do with the total compensation. It is right that they should elect to get the roll-over relief either for all or for only part of the compensation if they decide that that is sensible in the interests of the company and its shareholders.
I also seek clarification on another matter. It seems to many experts—I hope that the Chief Secretary will give guidance on this matter and will undertake, if necessary to do something about the situation—that roll-over relief is applicable only if the gilt-edged securities which companies receive are directly applied for the purchase of qualifying assets whereas what will normally happen is that gilt-edged securities will be sold and cash proceeds will be used for the purchase of qualifying assets. It cannot be the Chief Secretary's intention to insist that bits of gilt-edged paper are used to purchase qualifying assets. He clearly intends that where gilt-edged are sold, the money raised should be used for the acquisition of qualifying assets. It is important that we should be told whether the clause means that because there seems to be some doubt.
We come to the more substantial point dealt with in Amendment (e), a long and somewhat complicated amendment for


which fact I apologise. It seeks to ensure that the roll-over relief should be extended not merely to acquisition of physical assets, plant, machinery, and so on, but to the acquisition of the share capital of a company which a parent company receiving compensation would wish to acquire to replace a subsidiary which, through no initiative of its own, it has had taken away from it by nationalisation. Thus it is no use the Chief Secretary relying, as he did in Committee, on the argument that Section 33 relief is concerned with physical assets. We are now talking about something different. We are not talking about a company that is selling a machine tool and using the proceeds to buy another machine tool, but about something wholly different.
We are talking about a company which has had the entire share capital of one of its subsidiaries taken away from it and which wishes to use the proceeds to purchase the share capital of another company. I mention the share capital in both cases for a particular reason. The Government in the context of the Aircraft and Shipbuilding Industries Bill in its long Committee stage upstairs—I am glad to see many of the veterans, the scarred heroes of that battle, around me now, and I hope that they will take part in this debate—stressed that what they were doing was acquiring shares, not assets.
The whole basis of compensation according to that measure was that of acquiring shares rather than physical assets. The way in which the shares were valued were totally phoney, but I emphasise that the whole concept involved the acquisition and valuation of shares. It is wrong for the Government to try, as it were, to have it both ways and to say that everything was done on a valuation basis of acquiring shares, and then to combine it with a roll-over relief that would come into operation only if the compensation were used to acquire physical assets rather than other shares.
There is another reason why I believe that the Government need to think again on this point and should extend rollover relief to the acquisition of shares. I am not talking about shares for investment trust purposes, let alone speculation, which so upsets Labour Members, but about a trade investment to acquire a new subsidiary company for the group

in place of one of its subsidiaries that has been taken away by nationalisation.
I am sorry to see that the Minister of State, Department of Industry, hay not taken the trouble to be here for this debate. In his confused and muddled steerage of the Bill in Standing Committee he said a number of things that bear on this matter. For example, he said that a parent company would be able to use its compensation
to re-establish itself at the same level of activity as existed before its subsidiaries were vested.—[Official Report, Standing Committee D, 2nd March 1976; c. 1440.]
This is a crucial point and indeed was the litmus test of the Government's ideas on whether compensation was fair. That undertaking, which was repeated on many occasions, can be honoured only if companies are indeed able to establish them, selves at the same level of activity, that is to say, to purchase new companies to replace the old without capital gains tax being imposed on them.
In regard to capital gains tax the Government have not merely resiled on the undertaking they gave in Committee on the Aircraft and Shipbuilding Industries Bill, but they have indulged in an underhand way of discriminating still further in terms of the compensation payable to companies which suffer the fate of nationalisation or whose subsidiaries are nationalised. One of the ways in which they have defrauded the companies concerned is to say that this will be on the basis of share values of two and a half to three years ago. This is being done at a time of rapid inflation. This is monstrous, because no account has been taken of the fall in the value of money.
This point bears on the clause and indeed on other provisions now before us in a number of pertinent ways. First, the only way in which the Government can justify their action is to say "The share index is much as it was two and a half to three years ago". But, again, that argument can have force only if the whole matter is being discussed in terms of shares rather than in terms of the valuation of the underlying assets. If that is so, roll-over relief should be given on the acquisition of shares. The whole question of capital gains tax becomes very different when looked at in a period of rapid inflation and when the gains that are being taxed are not real gains but


simply a reflection of the falling value of the pound.
This matter goes wider than this clause. It raises the question of whether capital gains tax is right in its present form. It is interesting to note that the Chancellor of the Exchequer in his 1975 Budget made clear that he was unhappy about this point. However, he has done nothing about it. The result is that it is not a tax on real capital gains at all: it a capital levy. The inadequacy of the compensation, particularly at a time of rapid inflation, is plain and is the backcloth to all our discussions of this clause.
Amendment (f) is self-explanatory inasmuch as it questions the whole application of section 33 of the Finance Act 1965 to this matter. The amount of rollover relief confined to qualifying assets, as defined in Section 33, is wholly inappropriate.
Other amendments have been selected in respect of Clause 49. Amendment No. 45 is perhaps the best. I would recommend the Chief Secretary to accept it. It speaks for itself.
Amendment No. 46 brings in, in the context of Clause 49, the important point to which I referred earlier, in the context of New Clause 24, namely, the extension of roll-over relief to the acquisition of goodwill and shares acquired as trade investments. The amendment inserts this important point into Clause 49.
Finally there is Clause 47, which is almost as important, and which deals with the position of the individual shareholder. It is sometimes easy to get confused when we talk about shareholders in this context. Two kinds of shareholders are involved. There is the parent company, which is the shareholder which holds the shares of the operating subsidiary which has been nationalised, and there are the ordinary shareholders in the sense in which we normally use the term—the public, the pension funds, the life insurance companies, and so on, who hold shares in the parent company. The position of this latter group of shareholders is extremely unfair and unacceptable.
Because, say, it has its sole operating subsidiary nationalised and there is nothing left, a company may decide that

the right thing to do is to distribute the gilt-edged stock to its own shareholders so that they may invest it in the best way and let market forces operate. I am sure that Labour Members would rather this were done than to have it spent on boardroom fripperies.

Mr. Ron Thomas: The hon. Gentleman's comments amuse me in the light of his attitude to the Price Code, which is that new capital investment should be paid for by increased prices by the consumer rather than by the market mechanism of distributing investable funds.

Mr. Lawson: I fail to see the inconsistency. I should have thought that the consumer was the essence of the market and the Price Code, to which I object is undesirable and serves only to distort market forces. On this occasion we are talking about the capital market, which enables the shareholder to invest his capital where he think he can get the best long-term return.
However, the shareholder in this case is penalised because what happens is that the company will be liable to pay capital gains tax on the receipt of the compensation and then, when it distributes this to its shareholders, what has been taxed as capital in the hands of the company will then be taxed as income in the hands of the shareholder.
The Chief Secretary has had the courtesy to write to me about this. It was a matter which I raised in Committee and to which he was unable to reply at the time. He wrote to me on 30th June:
The same result follows where there has been a voluntary sale of shares by the holding company and the company distributes the proceeds. I am afraid that I cannot accept that there is a case for altering the normal tax rules on this point where the disposal takes place as a result of the nationalisation arrangements.
I would have thought there was a world of difference between a wholly voluntary distribution of capital and a distribution which has arisen simply and solely because a company has had, in some cases, all its operating subsidiaries taken away from it forcibly by nationalisation.
The Minister, when steering the Bill through Committee, took very great care to distinguish between acquisition by


takeover and acquisition by Act of Parliament. He argued that the Government did not need to pay any premium for control of those companies because this was something which was done in the case of commercial takeover, but it was not something which was done in the case of acquisition by Act of Parliament.
The Minister in Committee maintained that acquisition by Act of Parliament was something totally different; and yet now, because the Chief Secretary refuses to accept that difference, we have the penalisation of the individual shareholder as a result of an acquisition by Act of Parliament. That means, at the end of the day, that shareholders will have practically nothing left after the capital gains tax has been levied on the inadequate compensation in the first place and then shareholders themselves, when it is distributed to them, have to pay income tax rates on it. Amendment No. 47 seeks in a rather neat way to put the matter right.
There are one or two general points which I think it would be helpful if the Chief Secretary were to discuss and about which he could enlighten us. He did not promise that he would. He said that he would deal with the matter of the individual amendments, but his method of dealing with the new clause itself was wholly inadequate. For example, the new clause is headed:
Capital gains: compulsory acquisition of aircraft and shipbuilding shares
Indeed, subsection (2) makes it absolutely clear that it is confined to the shipbuilding and aircraft industries. Yet it is linked with Clause 49, which is a general clause dealing with capital gains liability on compensation stock for acts of nationalisation of all kinds.
We discussed this clause in committee under its maiden name of Clause 46. At that time the Chief Secretary hotly denied that this part of the Bill was specifically concerned with the nationalisation of the shipbuilding and aircraft industries. Yet now we have the new clause, originally intended as an amendment to the old, which is explicitly confined in this way. Why is there this discrepancy? Why does Clause 49 cover all nationalisation whereas the new clause covers only nationalisation of the aircraft and shipbuilding firms?

Mr. Tom King: What about nationalisation of the banks?

Mr. Lawson: My hon. Friend asks about nationalisation of the banks. One knows that there are many hon. Members opposite who have all sorts of nationalisation plans in mind. Yet this kind of limited relief, inadequate though it is, will be confined only to the act of nationalisation of the aircraft and shipbuilding industries. Why is that? Why is there this discrepancy? It seems to me that this is something of a hybrid Finance Bill, and we know the dangers attendant on matters of that kind.
I hope that the Chief Secretary will try some reconciliation and be consistent. Surely either Clause 49, too, should be applied simply and solely to the aircraft and shipbuilding industries, which would be a logical thing to do, or Clause 24 should be extended so that it applies to all industries which have the misfortune to be nationalised by this Government. I hope that the Chief Secretary will explain the inconsistency and explain what he proposes to do about it.
8.15 p.m.
I would revert to the point which the Chief Secretary failed to explain in Committee and, that is, if he is to make any pretence that the companies should be compensated fairly for what they have lost, it is imperative that, at the very least, those companies should be compensated in such a way that they do not incur capital gains tax liability. If the Chief Secretary's method is followed, that can be done only by eliminating Clause 49, as one of the amendments suggests. However, if the Chief Secretary will not accept that, he must extend the roll-over relief to the acquisition of the share capital of other manufacturing companies which will form part of a group which has lost one of its subsidiaries.
We should also be told the cost of these nationalisation proposals and the cost of New Clause 24. We know that the Treasury works everything out so that the House can decide these matters sensibly. We must be told the cost of New Clause 24 and of acquiring these shares, net of capital gains tax or gross, whichever he prefers—preferably both.

Mr. Tom King: To be fair to the Chief Secretary, he has already given the infor-


mation about the cost, although it was refused by the previous Secretary of State for Industry. He said on television that it would be £300 million.

Mr. Lawson: That is a very pertinent point. Although the Chief Secretary gave the total cost on television, it is characteristic of this Government that they have never been given to the House. Indeed, when we asked for that figure in Committee only a few weeks ago, it was denied us. Yet it is given on television, where the right hon. Gentleman cannot be held accountable.
But what I was also asking for and what I do not believe has been given is the cost of the new clause. The Chief Secretary will find that the cost of extending the roll-over relief as I have suggested would not be great—certainly nothing compared with the vast cost of the nationalisation proposals in themselves.
I know the Chief Secretary's dedication to the cause of cutting public expenditure and getting the borrowing requirement down; I know his anxiety about the size of the National Debt and problems of debt management. Let us not delude ourselves: the issue of large quantities of gilt-edged stock in these nationalisation proposals will make the problem of managing the National Debt substantially greater and will almost inevitably raise interest rates, because much of this stock will be sold.
That the Chief Secretary, with those real preoccupations, should be introducing clauses of this kind at this time is beyond comprehension. It is also beyond comprehension that we should hear of all this heartache over some of the cuts that are coming when here is a cut that the right hon. Gentleman can make that would cause no heartache to anybody.

Mr. Ron Thomas: I start from a totally different point of view from that of the hon. Member for Blaby (Mr. Lawson). He mentioned the sterling contributions of the Tory Party in the Committee on the Aircraft and Shipbuilding Industries Bill. The Official Report of that Committee shows that his colleagues spent the bulk of the time, probably 80 to 85 per cent. of it, doing all they could to extract the last penny from the taxpayer for the shareholders of the com-

panies. Not for them any concern about jobs, industrial democracy or the real matters which affect the workers in those industries. Their main and absolute concern week after week was in extracting the highest compensation for the shareholders.
I believe that the compensation already worked out is far too generous. Without the kind of public support that it has had over decades, the aircraft industry at any rate would no longer exist and we should not be arguing what kind of compensation to pay shareholders of Vickers, GEC and other companies. It has been estimated that the so-called private aircraft industry has been kept going on about £5 million a week of public money.

Miss Harvie Anderson: I know that the hon. Gentleman and I are most unlikely to start from the same premise, but my concern happens to be to retain jobs on the Clyde. There is nowhere in this country where jobs are more necessary. Therefore, if the compensation is unfair, as I believe it to be, the result will be fewer jobs. That is why I served on the Committee considering the Aircraft and Shipbuilding Industries Bill and was glad to be there. It is unrealistic of the hon. Gentleman to say that the Opposition were concerned only for the shareholders. Certainly we are concerned for the shareholders, but it is because we know that it is from that source that jobs are supplied and held.

Mr. Thomas: With all due respect, if the right hon. Lady is mainly concerned with jobs, I do not understand her attitude and that of her colleagues in their antics over the last few weeks, prevaricating and preventing the shipbuilding industry from being brought into public ownership while jobs were going in that industry because it was not taken into public ownership. I am afraid, therefore, that I do not go along with the kind of crocodile tears that the right hon. Lady was shedding just now.
I repeat, the compensation is already far too generous. We made it clear in the consultative document that, when we worked out the compensation, we would take account of the fact that the aircraft industry had already benefited from the injection of hundreds of millions of pounds of public funds.
I should like more information about the new clause, but it seems that we are once again giving special treatment by means of these provisions for rolling over and deferring capital gains tax liability. We all know that in the end deferment of that liability means that the companies pay nothing. I can understand the hon. Member for Blaby wanting an extension and saying that there ought not to be any capital gains tax liability at all in respect of what people do with the compensation money. Essentially, that is what the hon. Member is saying.
I ask my right hon. Friend to convince me that no special treatment is being given to those who receive compensation—in Vickers, GEC and other concerns—as far as public ownership of the aircraft industry is concerned, because in my judgment they have already had enough public money and that industry would no longer be in existence had it not received almost £5 million a week, as it has been receiving over the last decade or so.

8.30 p.m.

Mr. John Cope: The hon. Member for Bristol, North-West (Mr. Thomas), like myself, served on the Committee on the Aircraft and Shipbuilding Industries Bill, but the hon. Member does not do justice to our debates. In particular, he exaggerates the length of time we spent on the compensation clauses. We were half-way through the Committee in both time and in the clauses of the Bill before we reached any of those clauses. At the same time, my hon. Friend the Member for Blaby (Mr. Lawson) seemed to me to do less than justice to the part played by the hon. Member for Bristol, North-West in debate because he was one of those who helped us to spend such a long time on the Committee stage, so that in the end it became a record.
The selection of Amendment No. 45 with the new clause opens up the whole of the principles of Clause 49 of the Finance Bill, as well as the points raised in the new clause. I consider that New Clause 24 is a fully justified, though only partial, retreat from the position taken up by the Government in relation to compensation under the Aircraft and Shipbuilding Industries Bill last year. It is right that we should remind ourselves

at this stage of the history of this compensation. I hope that the Chief Secretary is fully aware of the history and what has happened concerning it.
The original terms of compensation were announced in outline in February 1975. When they were originally announced, compensation was not liable for capital gains tax under any Tory Act or under the Labour Government's own Act of 1965 or any other Finance Act which had been passed. Even though the compensation was not liable for capital gains tax, the terms were disgraceful. As we demonstrated in Committee, if they had been offered by a foreign Government in payment for the assets of British companies being nationalised overseas, they would have been regarded by the Export Credits Guarantee Department, the Government's own agency, as confiscatory, and payment would have been made under insurance cover. We demonstrated this in Committee and I believe it to be incontrovertible
The next thing was that in July 1975, in response to a Written Question by the hon. Lady for Bolton, West (Mrs. Taylor), the Chief Secretary announced that he proposed retrospectively to alter the tax regime as far as this compensation and all future compensation under similar Bills was concerned. He did so in two respects, first by providing that the gains on shares were to be taxed when the gilt-edged shares given in exchange for the shares were sold. This is incorporated in Clause 49(3) of the Bill.
Secondly, the right hon. Gentleman announced that the gilt-edged shares themselves were to be taxed if they were sold within 12 months of their issue instead of within 12 months of the original shares for which they were given in exchange being acquired. This is incorporated in Section 49(2) of the Bill and it is not affected by New Clause 24 or the amendments thereto. He applied this retrospectively to the Industry Bill and to the Aircraft and Shipbuilding Industries Bill, the terms of which had already been announced. We were subjected, however, to a pompous speech on the latter Bill about how important it was that the compensation terms, on which the market had been relying should be


adhered to absolutely, but the Government themselves failed to stick to them.
Following a considerable amount of protest, with meetings and other action, the Government decided to introduce at this Report stage what is now New Clause 24, which implements the undertaking given in the Budget debate by the Chief Secretary. As my hon. Friend the Member for Blaby said, however, it applies to aircraft and shipbuilding only.
There is a small point of detail with which I should like the Chief Secretary to deal. The new clause says that it is to apply to the acquisition of shares in companies engaged in the manufacturing of aircraft or guided weapons, or in shipbuilding or allied industries. We had a good deal of discussion in Standing Committee about allied industries and what they were, whether they included ship repair, the manufacture of slow-speed diesel engines and so on. I should like the Chief Secretary's confirmation that it is his intention and belief that the new clause will apply equally to compensation for the acquisition of shares in ship repair and slow-speed diesel engine manufacturing companies as well as shipbuilding companies themselves, and for all companies which it is intended should be taken over under the Aircraft and Shipbuilding Industries Bill.
A further point to which I would call attention on this new clause is the four-year limit, extended, as my hon. Friend the Member for Blaby has said, to four years from the exchange of the shares; that is the language used in the new clause. In Clause 49 (6) of the Bill, "exchange" is specifically defined as being the date on which right to the shares is granted.
I hope that the Chief Secretary will tell us whether the definition of "exchange" of shares in Clause 49 (6) applies as the starting date of the four years. It is not clear to me that it does. It appears to apply only to Clause 49. There is no definition that I can see that applies to New Clause 24 to start the four years except "exchange", which need not necessarily be vesting day. Obviously there will be considerable delays between vesting day and some of the compensation being paid. There is an elaborate arbitration procedure to be gone through. There is the most farcical

method of valuing the shares with a whole list of guesses to be assembled and argued about before arriving at the notional value of a parcel of shares which are not quoted but might be on the Stock Exchange.
Worst of all, as my hon. Friend the Member for Blaby pointed out, the new clause does not extend the roll-over from the purchase of assets to the purchase of shares, and it should do so. My hon. Friend made that point very strongly. Therefore, I shall not elaborate it.
I return to the point of the compensation generally. The original statement by the then Secretary of State for Industry was that he wanted to achieve fairness in the compensation. The Government have clearly ratted on that. It is not fair in general or, for that matter, as between the individual companies or subsidiaries which are being taken over. There are obvious unfairnesses between some of them.
In Committee, Ministers were more specific. My hon. Friend the Member for Blaby quoted from the Committee proceedings on the Aircraft and Shipbuilding Industries Bill. Unfortunately, he attributed his quotation to the Minister of State. I must tell him that the quotation should have been attributed to the Under-Secretary of State, since replaced. However, the statement was in no way repudiated.
The rule of the Committee appeared to be that if the Government thought that there was a good argument the Minister of State should deal with it. If, on the other hand, there was a feeble argument, they put up the Under-Secretary of State instead. Indeed, this was the Under-Secretary of State.
I should like to give the House another quotation from the Under-Secretary of State. At column 2080 the hon. Gentleman said:
The Government have proposed in the Bill compensation which seeks to make good to a shareholder the loss caused by the acquisition of his shares."—[Official Report, Standing Committee D, 25th March 1976; c.2080.]
I do not believe that that is true of compensation as it stands in the Aircraft and Shipbuilding Industries Bill, and it is certainly not true if Clause 49 of this Bill goes through and waters down the


compensation from what is offered in the Bill.
The shares are to be valued below their value as a controlling parcel. The Chief Secretary will recall that in the past we have argued about the difference between the cost of control and individual shares. This proposal seeks to value the compensation as individual, not as control, shares.
I believe that the compensation generally is a fraud and that Clause 49 makes it worse. It is retrospective. By introducing the new clause, the Government have gone a little of the way to admitting that it is a fraud, but they have not gone very far in correcting it. They have exposed the flaws in their logic, but they have not put them right.
I hope that we shall vote not only on Amendment (e) to the new clause but in due course on Amendment No. 45, which seeks to take Clause 49 out of the Bill altogether and to go back at least to the compensation as it was first announced.

Miss Harvie Anderson: I have been roused by the hon. Member for Bristol, North-West (Mr. Thomas) to make plain that there is one small point which should not be overlooked. If the compensation will be, as we all believe, much less than the fair compensation that was promised at the outset, we shall do damage in two ways. The successful firms cannot carry on their enterprises with the limited money. At the same time there is an equally important point. In many cases we expect that the individuals who are at present running successful companies will continue to do so under nationalisation. That is common sense.
I feel sure that the Chief Secretary will have sympathy with those who, having run a successful industry, then have it virtually confiscated but at the same time are asked to continue to run it under nationalisation. If the expertise and good will of these people are wanted by the Government—as I believe they are—to continue to make a contribution, especially to shipbuilding, these people, who have the best knowledge and expertise in the country, must be given some assurance that the compensation will be fair. They must be shown some good will to encourage them to continue in the industry. I hope that the Chief Secretary will not overlook that aspect, which runs

through many levels of expertise in these important exporting industries.

Mr. Joel Barnett: Before dealing with the large number of amendments to which the hon. Member for Blaby (Mr. Lawson) spoke, I shall deal with the question of compensation, which one of my hon. Friends considered to be too generous but which the right hon. Lady the Member for Renfrewshire, East (Miss Harvie Anderson) and the hon. Member for Gloucestershire, South (Mr. Cope) thought was confiscatory. The matter is not relevant to these amendments or to the clause. We are not speaking about the size of the compensation. We are speaking about the capital gains tax treatment on the compensation. I believe that the compensation is fair and reasonable. I am sure that that is how it will be seen in due course.
I assure my hon. Friend the Member for Bristol, North-West (Mr. Thomas)— although I may not be able to convince him, as he requested—that we seek to achieve a fair balance. My hon. Friend asked me whether we were giving special treatment under the new clause. The simple answer, in the narrow sense, is "Yes". In one sense we are being generous. We are allowing roll-over relief, in a way that is not normally applied on the sale of shares, to qualifying assets under Clause 33. We thought it right to do so in the ineerests of an industrial strategy that wants to see the proceeds of this compensation going into industry. Therefore, to the extent that the proceeds go into industry, it will be beneficial to the nation. I am sure my hon. Friend accepts that that would be right for the Government and for the country.

Mr. Lawson: Mr. Lawsonrose—

Mr. Barnett: I know that the hon. Member for Blaby can never resist interrupting me, even before I have been on my feet for one minute. However, I should like to finish replying to the remarks of my hon. Friend.
My hon. Friend asked me whether deferment meant that the persons concerned would never pay. Deferment of roll-over relief means that the relief is rolled over into qualifying assets. If those qualifying assets are never realised there is no capital gains tax liability. But neither would there have been capital gains tax liability if the original assets had not been sold. A deferment


simply means the time when the assets into which they have been rolled, are sold. At that time there would be a capital gains tax liability.

Mr. Lawson: The Chief Secretary said that the Government were giving this roll-over relief to the aircraft, shipbuilding and ship-repairing companies as they were anxious that they should invest their compensation in productive assets in industry rather than keep the assets in gilt-edeed stocks or place them on the market. Is he saying that in any future nationalisation that the Government might be foolish enough to undertake they will not be anxious that the compensation should be invested in industry? If not, why not?

8.45 p.m.

Mr. Barnett: It is absolutely marvellous. The hon. Gentleman asked me a whole series of questions and has an amendment amongst many on precisely that point. I should like to reply to every point the hon. Gentleman has raised and I shall come to that one, especially as he has raised it twice.
The hon. Gentleman asked me first whether the roll-over relief would apply even though the gilts were not used for buying all the new assets. I can give him that assurance. In general, the rollover relief practice is that, where the proceeds of the first assets are temporarily reinvested before being rolled over into the qualifying assets under Section 33, they will still be eligible for the Section 33 relief.
Amendment (c) to New Clause 24 concerns timing. It would allow a four-year period for making an election for roll-over relief to he extended. If we extended it in the way in which the hon. Gentleman suggested, once we got over the period of six years we should be in the limitation period for the purposes of assessment. I know that the hon. Gentleman's concern is that the issue of gilts could be delayed pending negotiations on the compensation price. My right hon. Friend the Secretary of State for Industry has made it clear that he hopes to make substantial payments on account very soon after vesting day, so most companies should be in that position well within the four-year period. If it is found that any difficulty arises, we shall certainly look into the matter

again. There is plenty of time, because there are four years in which to claim.
Amendments (d), (e) and (f), which include the large amendment to which the hon. Gentleman spoke, seek to substitute new rules for rolling over a gain, eliminating the reference in New Clause 24 to the existing rules in Section 33. The amendments provide that a company may elect that the exchange of shares for gilts on nationalisation is not to be treated as a disposal of shares. I hope he will agree that this is going much too far. We certainly cannot accept that.
The hon. Gentleman quoted what I said upstairs and said that I would say it again, so I had better do just that. He said that I would say that the Section 33 intention was to allow roll-over relief only where there was a roll-over into qualifying assets. That is absolutely true. That was the position under Section 33, and to go beyond that would be to extend what is a pretty generous relief which has not normally been applied to the sale of shares. This would be to go much wider than was ever intended under Section 33 of the Finance Act 1965 and much wider than I would want to do or would recommend the House to do.

Mr. Lawson: Going back on their word.

Mr. Barnett: As the hon. Gentleman quoted me as having said precisely that upstairs, I am not sure that I am going back on my word. I am repeating what was said up stairs and sticking to that.

Mr. Lawson: I should not wish it to be thought that I was saying that the Chief Secretary personally was going back on his word. The Government are going back on their word, because they said that companies would be able to re-establish themselves at the same level of activity as they had before.

Mr. Barnett: I am saying that what I promised when I met delegates from the industry I have done in the clause, in granting roll-over relief in the way I have suggested. I hope that that will be found helpful, as am sure it will, to the industries concerned.
Amendments (a), (b) and (g) seek to give an alternative option to a claim for roll-over relief by allowing the shareholder, which is to include individuals as well as companies—but not, I understand, trustees—to elect that paragraph


6 of Schedule 7 to the Finance Act 1965 should apply. Paragraph 6 contains the special capital gains rules for company amalgamations. The effect is that where a person gives up shares in company A in exchange for shares in company B the new shares are treated as the same assets as the old shares, acquired on the same date and for the same cost. The effect would therefore be to treat the gilt-edged issued by the Government on the aircraft and shipbuilding nationalisation as the same asset as the compulsorily-acquired shares. In other words, the hon. Gentleman is seeking to restore the position to what it was before Clause 49 was introduced. I cannot accept that. There is also an amendment to delete Clause 49, which is the central clause to which all this relates.
Amendment No. 46 is intended as another version of the roll-over relief concession. I am not sure whether the amendment works, since it opens with the odd proposition that the relevant disposal of gilt-edged must be
for the purpose of the acquisition of a qualifying asset".
It is difficult to see how it would be possible to satisfy that requirement. The matter is better dealt with by the relief I am providing. I hope that on consideration the hon. Gentleman will recognise that. Indeed, in some respects that amendment could be more restrictive than we intended.
The purpose of Amendment No. 47 is to ensure that where a company receiving gilt-edged securities in exchange for shares compulsorily acquired on any nationalisation passes that compensation stock on to its shareholders within three years—it therefore ranking as a distribution, taxed as income of the shareholders, and taxable as part of their capital gains if distributed in a liquidation—that disposal of the gilt-edged securities will not trigger the accrued gain or loss on the shares arising at the date of exchange. If I accepted that, I should incur the wrath of my hon. Friends because I should be much more generous than it is reasonable to be.

Mr. Tom King: The right hon. Gentleman has rightly made the point that in assessing the treatment of capital gains tax problems the general standard of compensation is very germane. He spoke of

being generous. Has he realised that compensation will be based on a company's results in 1972–73, on which the share price for 1973–74 was probably based, on which assets may be taken away from it in 1976 and on which it will receive the compensation funds in 1978 if it is lucky? How can he describe as fair a situation in which a company with net assets of £10 million, making a pre-tax profit last year of £7 million, will receive £4 million compensation? Does not all the right hon. Gentleman's professional training tell him that that is an outrage?

Mr. Barnett: I went a little wide of the clause in even referring to the compensation as fair and reasonable. Whatever the compensation, we are talking about what should be the capital gains tax treatment. It is no use the hon. Member for Bridgwater (Mr. King) shaking his head. That is what we are talking about. If compensation were 10 times as high as the Government are prepared to go, one would still need to deal, as we are dealing here, with the question of capital gains tax liability.
Because I went a little wide of the new clause in talking about the compensation terms being fair and reasonable, the hon. Member for Bridgwater took a narrow aspect of that and sought to prove, by going much wider than the clause we are debating, that the compensation terms are not fair and reasonable. If I went into the detail sought by the hon. Gentleman, it would be nothing to do with the clause. We debated this subject upstairs, and if I went into it again tonight I would be upsetting the Opposition and Mr. Deputy Speaker. We are talking about capital gains liability on eventual compensation.

Mr. Tom King: The right hon. Gentleman is taking a long time to avoid answering the basic question. He claimed at the start of his speech that the compensation terms were fair and reasonable. Our contention is that the position under capital gains tax is relevant because the basic terms are so grossly unfair that it is outrageous further to penalise people with onerous capital gains tax.

Mr. Barnett: Even if the hon. Gentleman were right, which I do not accept, capital gains tax must be fair and reasonable, no matter what the compensation.


He is putting forward an interesting submission. He suggests that the compensation is unfair and that we should therefore have capital gains tax terms which are grossly unfair as compared with other taxpayers.
Clause 49, which Amendment No. 45 seeks to remove, simply and fairly ensures that accrued gains are taxed and accrued losses are allowable. Before that clause was put forward, the situation was hugely generous for special reasons relating to steel nationalisation. Gains were not taxed and losses were allowable. The hon. Member for Bridgwater is a fair and reasonable man and I am sure that he would not ask us, whatever he feels about compensation, to leave that situation unaltered.
I cannot accept Amendment No. 45. It seeks to re-create the situation which gave an unfair amount of tax relief to one section of shareholders. I hope that my hon. Friends will resist the amendments.

Mr. Cope: Can the right hon. Gentleman confirm the point I raised about shipbuilding and allied industries?

Mr. Barnett: Yes, I confirm that.

Mr. Nott: The Chief Secretary said that it was not his task or the task of the Committee to talk about the size of compensation for nationalisation, but he went on to say that, in his view, the compensation was fair and reasonable. He said that he was here only to talk about the capital gains tax aspects of the matter.
But he is a member of the Government and has a collective responsibility for the Government's actions. It cannot be for him to separate the capital gains tax question from the overall compensation, since my hon. Friends are rightly concerned about the compensation which shareholders will receive in a net form after they have paid tax.
9.0 p.m.
It is intolerable to have a Minister from the Treasury coming here and telling us that compensation is unrelated to taxation, that he is merely here to debate the fiscal side of the issue, that he believes it is fair and reasonable to leave the matter there. That is not good enough.
My hon. Friends the Members for Blaby (Mr. Lawson), and Gloucestershire, South (Mr. Cope) and my right hon. Friend the Member for Renfrewshire, East (Miss Harvie Anderson) have all said that this measure is an underhand way of diminishing still further the compensation, which by any measure is anyhow quite unreasonable, in gross terms. As my hon. Friend the Member for Blaby said, it was fixed on the basis of share values of two and a half years ago and there has been no adjustment made for inflation in the intervening period.
Now the Chief Secretary comes to the House with something entirely new. He is changing the existing rules, and it is not good enough to say that this is a very generous relief. It is not generous at all. It is the Treasury which has changed the rules, and as a result shareholders receiving gilt-edged stock in return for nationalisation will be considerably worse off.
We wholly reject these arguments. What is the Chief Secretary's answer to the undertakings given by other Ministers? My hon. Friend the Member for Blaby quoted a statement made during the debate on the Aircraft and Shipbuilding Industries Bill on 2nd March in which the Under-Secretary stated clearly that the basis of compensation allowed the parent to re-establish itself at the same level of activity as existed before its subsidiaries were vested.
Every word that the Chief Secretary has said today makes it absolutely clear that companies will not be in the same position after they have paid capital gains tax as they were before. It is intolerable for the Minister to disclaim remarks made by his colleagues in other Departments and to come forward and diminish still further the compensation given by another Department.
Another complaint which I have goes back to the business motion that we debated earlier. As I understand it, this new clause for roll-over relief appeared on the Order Paper on Monday after being tabled on Friday. The Chief Secretary said that there was nothing unusual in the manner in which this matter had been handled. But on 2nd July 1975—more than a year ago—the Government indicated that they would pursue this course of action. Yet the


actual details of roll-over relief were put down only on Friday.
My hon. Friend the Member for Blaby quoted remarks made by the Chief Secretary on 8th April in the Budget debate. On that occasion he said:
As foreshadowed in the Written Answer that I gave on 2nd July 1975, the Finance Bill will contain a provision for charging the accrued gains, and allowing losses, on shares given up on a nationalisation in exchange for gilt-edged securities, the gains to be assessed at the time that the compensation stock is sold.
He added:
A Government amendment will therefore be tabled in Committee on the Finance Bill to provide that tax on gains arising from the issue of compensation stock for shares in the aircraft and shipbuilding companies to be acquired under the Bill at present before the House shall be deferred where parents or consortium companies reinvest the compensation in qualifying assets."—[Official Report, 8th April 1976; Vol. 909, c. 766.]
We debated the clause in Committee, but only at the last moment is the Chief Secretary now coming forward with a new clause on roll-over relief. Why has it taken all this time to produce it? Why did it appear on the Order Paper only on Monday when the Government have had more than a year to think about it?
In Committee the Chief Secretary also made it perfectly clear to my hon. Friend the Member for Blaby that Clause 49 would be of general application. Indeed, as we understand it, so it is. But if it is to be of general application, why is the roll-over relief not to be of general application too? This was a point made by my hon. Friend the Member for Gloucestershire, South.
It is all very well for the Chief Secretary to say that ship repairing is included, but the clause as drafted does not give us any confidence that the Chief Secretary's assurance, given a few moments ago, is valid.

Mr. Lawson: My hon. Friend may recall that I asked the Chief Secretary to explain this discrepancy between Clause 49 and the new clause, and he said that as I had asked it twice he would certainly answer my question. Despite that, he has still not answered it.

Mr. Nott: Quite contrary to what the Chief Secretary said in Committee, this roll-over relief applies apparently, only

to the aircraft and shipbuilding industries. This is not what we were told in Committee. We were told that it was a general relief. The roll-over is not a general relief. It is specific.
We have legislation changing the tax laws to deal with a specific case derived from the Government's doctrinaire policies to nationalise an industry that clearly does not seek it in any way at all. I quote from my hon. Friend the Member for Hertfordshire, South (Mr. Parkinson) in Committee. I think he summed up our feelings extremely well. He said:
A very large amount of gild-edged stock will be issued to people who have businesses which they are perfectly happy to keep. They will have to take stock which they do not want. The Chief Secretary has explained that he will do several favours to those lucky people. He will not be tough with them. He will take from them only what they do not want to sell, give them something which they do not want to take in exchange for it, and will make sure that any gains tax which may be deemed to exist will be built into that stock."—[Official Report, Standing Committee E, 8th June 1976; c. 625.]
The whole manner in which this clause has been handled and now the roll-over relief, is as unsatisfactory as every other aspect of the Bill. I cannot see why it is not possible to meet the points made by my hon. Friend the Member for Blaby and my hon. Friend the Member for Gloucestershire, South.
If, for example, Hawker Siddeley is to be allowed to sell its gilt-edged stock and to use the proceeds through the roll-over relief concession and invest in qualifying assets, why is it to be prevented from actually using the proceeds of that gilt-edged stock to buy other stock? Hawker Siddeley might wish to go out and buy a company which has qualifying assets. Why should Hawker Siddeley, because it wishes to go out and purchase a company, have to bear capital gains tax on the way through, thereby greatly diminishing the compensation it receives? It makes no sense and is totally contrary to the undertakings given by the Government throughout the whole passage of the Aircraft and Shipbuilding Industries Bill.
I have quoted one undertaking given by the Under-Secretary during the passage of that measure. The reason that this is being done—I hope that my hon. Friends are all absolutely clear about what is happening—and the reason all the rules are being changed is that the


Government know, and the Treasury in particular knows, that it is becoming increasingly difficult for the Government to finance their borrowing requirement.
The Government are concerned that the shareholders who receive their gilt-edged stock will not hold it but will tip it on to the market. The Government will have to buy it up, and the money supply will rise. It is a measure dictated by the Treasury to ensure that the money supply does not get out of hand as a result of what is being done by another Government Department. The capital gains tax rules are being changed because the Treasury is concerned about the impact of this measure on the gilt-edged market. The shareholders of shipbuilding and aircraft companies will have their compensation diminished deliberately because the Government are worried about the management of the National Debt. If the Chief Secretary denies that, will he please stand up and say that that is not the reason?

Mr. Joel Barnett: The hon. Gentleman is seeking to go back to the old position, which Clause 49 changes. The old position was that capital gains tax was not charged but a loss was allowed. I find that remarkable.

Mr. Nott: If some of the shareholders affected by the Aircraft and Shipbuilding Industries Bill have capital gains tax inherent in their stock—as they do—on the old basis they would not have borne capital gains tax on the sale of their gilts. There would presumably have been greater sales of gilts which would have impacted on the gilt-edged market, contrary to the Treasury's wishes. A further discriminatory measure is being taken against shareholders who hold gilt-edged stock because the Government are worried about the management of the National Debt.
As my hon. Friend the Member for Blaby also said, some companies which receive compensation will pay capital gains tax, and the shareholders will be taxed again on their incomes when they receive a distribution. There will be double taxation.
The Government gave undertakings that there would be fair compensation. The Government are diminishing even further that compensation in after-tax

terms. They have gone back on their commitments and undertakings. They are incapable of putting down amendments until the last moment. They are treating the House of Commons with contempt by giving us only three days in which to consider the rollover relief proposal. It is right that we should divide the House.

Question put and agreed to.

Clause read a Second time.

Amendment (e) proposed to the proposed clause, in subsection (3) (a) at end insert:
'that the exchange shall be treated as not involving any disposal of shares by that company, and where such an election is made, to the extent that a subsequent disposal of the whole or part of the gilt-edged securities is made by that company for the purpose of the acquisition of a qualifying asset and the acquisition takes place or an unconditional contract for acquisition is entered into in the period beginning on the date referred to in subsection 6 of section 49 and ending three years after the date of the subsequent disposal, the disposal of the qualifying asset and not the disposal of the gilt-edged securities shall be treated as a disposal and for this purpose "qualifying asset" means an asset (including goodwill and shares or securities acquired as investments) which is, or is an interest in, an asset to be used or held either for the purposes of a trade or business carried on or to be carried on by the company from whom the compulsorily acquired or by a member of the shares referred to in subsection (1) above were same group of companies as that company, or for any other purpose for which the shares were held prior to their compulsory acquisition'.—[Mr. Nott.]

Question put, That the amendment be made to the proposed clause:

The House divided: Ayes 174, Noes 230.

[For Division List No. 241 see col. 611]

Question accordingly negatived.

Clause added to the Bill.

Dr. Glyn: On a point of order, Mr. Deputy Speaker. I wish to seek your guidance because a number of my hon. Friends and I are concerned about New Clause 1, entitled "Allowance for travel to work". We had hoped that the House would be able to debate that matter because I understand that it was not debated in Committee. I should be grateful for your guidance.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): The only guidance I am able to give the hon. Gentleman is that Mr. Speaker has not selected the clause in which the hon. Gentleman is interested.

Mr. Julian Ridsdale: Further to that point of order, Mr. Deputy Speaker. I, too, wish to refer to New Clause 1, which I tabled. When the Bill was in Committee, I understood that we would have an opportunity on Report of debating the important subject of travel to work. It is very disappointing that so many hon. Members will not have a chance to debate that matter.

Mr. Deputy Speaker: As I have said, it is entirely a matter for Mr. Speaker's discretion, and is not a subject on which I can be of any assistance.

Mr. Paul Channon: Further to that point of order, Mr. Deputy Speaker. May I point out that New Clause 1 cannot be out of order, because I moved a similar clause 15 years ago and it was then in order? It is most regrettable that the House is unable to debate this matter tonight.

Mr. Deputy Speaker: The proposal on which hon. Gentlemen are inquiring is moved fairly regularly, and Mr. Speaker has his own discretion as to the years in which it will be debated. He obviously decided "Not this year".

New Clause 11

SOCIAL SECURITY CONTRIBUTIONS: RELIEF FOR SELF-EMPLOYED

"In section 8 of the Taxes Act (personal relief), after subsection (1B) there shall be added the following subsection:— (1C) If the claimant is liable to Class 2 and Class 4 contributions under the Social Security Act 1973, the deduction to be allowed under this section shall be increased by an amount equal to income tax at the standard rate on that part of his contributions which corresponds to the contribution payable by an employer in respect of an employed earner"".—[Mr. Paul Dean.]

Brought up, and read the First time.

Mr. Paul Dean: I beg to move, That the clause be read a Second time.
The clause seeks to give relief to the self-employed. It looks a somewhat technical matter, but the point is a simple

one—namely, that the self-employed should be given tax relief on that part of the national insurance contribution which corresponds to the employer's national insurance contribution which is regarded as a business expense.
The background to the new clause is that substantial new taxes and other burdens have been placed by the Government on the self-employed and small businesses. Although there have been some reliefs in the Finance Bill, they have been tiny in comparison with the addition impost imposed in the last two years. The self-employed and small businesses have, in my judgment, had a raw deal.

Sir John Hall: On a point of order, Mr. Speaker. I believe that the microphone my hon. Friend the Member for Somerset, North (Mr. Dean) is using cannot be working. At this end of the Chamber it is almost impossible to hear his remarks.

Mr. Speaker: Those responsible will have noticed the hon. Gentleman's intervention.

Mr. Dean: I am grateful to you, Mr. Speaker, and to my hon. Friend for drawing attention to the matter.
I was saying that in my view the self-employed and small businesses have had a raw deal, because their burdens have increased, are increasing and should be diminished.
9.30 p.m.
I wish to remind the Government that on 13th January this year a resolution was passed which read as follows:
That this House recognises the importance of the self-employed and the small independent business in the industrial, commercial and social life of the nation; accepts their major contribution to the maintenance of employment and the restoration of Great Britain's economic health and calls on Her Majesty's Government to find means of alleviating the taxation and other burdens which threaten their existence, and to conclude as quickly as possible the reviews of national insurance provision for the self-employed both at home and witthin the EEC.
Ever since that resolution was passed by the House—it is over four months now—we have been waiting with great anticipation for Government action to implement it. Indeed, that anticipation was sharpened on the 17th February this year when, in reply to a question which


I put to the then Prime Minister, I got as part of the answer:
It was a good resolution and the House accepted it, with our support."—[Official Report, 17th February 1976; Vol. 905, c. 1124.]
Therefore, we had a resolution passed by the House on 30th January and shortly afterwards the then Prime Minister said that it was a good resolution passed with the support of the Government. We are entitled to ask what action the Government have taken and intend to take to implement that resolution.
It is not only a matter of a resolution of the House. We are also dealing with a section of the community which is vital to the economic and social health of the nation. One has only to consider a few examples which clearly illustrate that, under present conditions, the self-employed and small businesses have one hand tied behind their backs with the burden which they are bearing, whereas with a little encouragement they could transform the employment situation in our community.
One recognises that there are something like 800,000 small businesses in our community. If each one could be persuaded to take on one extra man or woman, that would have a dramatic effect on the employment situation of the country. If on the other hand, through increasing burdens, each of those 800,000 firms had to sack one extra man or woman, that too would have a dramatic effect on the employment situation.
Another aspect, which I believe is of great significance in the context of the Bill, is that we are living in the age of the ailing giant, the large public corporation, nationalised industry or large private enterprise concern, with a bad track record but an insatiable appetite for taxpayers' money. If we are to restore our economic health, we must pay more attention to encouraging small businesses to make the contribution which they can to the health and life of our nation.
A third point is that if one looks for the qualities of private enterprise or innovation, where does one look? One looks to the small independent business. If one wants to find good working relations, where the boss knows the employees and the employees know the boss, where does one look. One looks to the small business. If one wants to find a good example of

productivity, where does one look? One looks to British farmers, in the majority of cases family businesses run by the boss and his family. If one wants a good example of hard work, long hours and service to the community, where does one look? The shopkeeper, the doctor, and the parson are very good examples of this. This is the backbone and, in my judgment, the importance of this somewhat technical new clause.
What has happened since that resolution of the House was passed on the 30th January this year? One of the first things that happened was a big increase in national insurance contributions in April. I am not disputing that an increase was necessary and that some increase should be paid by the self-employed like everyone else. In terms of implementing the resolution of the House, however, the Government have obviously, through this additional impost, taken on a minus mark.
The increase in tax relief in the Budget means that in many cases the self-employed are worse off. For example, a self-employed person with taxable profits or gains of £5,000 a year is now paying an extra £104 a year in national insurance contributions out of his net income. But the tax concession in the Bill for a £5,000-a-year family man with two children is only £87·50. So he is clearly worse off. Again, the lower limit for class 4 contribution liability has remained unchanged at £1,600, despite the fall in its real value. This means that many self-employed people who hitherto did not pay the class 4 contribution at all have been drawn into that net.
Those two examples illustrate the additional impost in national insurance contributions, which has not been compensated for by the tax reliefs in the Budget. It is true that there are some reliefs in the Budget which will be of some help. The changes in corporation tax and capital transfer tax will bring some assistance to this group. The reductions in the penal rate of 25 per cent. of VAT will also help, although it is disappointing that we still have multi-rate VAT, a low starting point, VAT on bad debts and the VAT bureaucracy which causes so much unhappiness to the self-employed. But at least the halving of the 25 per cent. rate is some help.
Another modest measure in the Bill is the improvement in the provisions for retirement annuities for the self-employed. However, although the amount which can be put aside is raised from £1,500 a year to £2,250, that does not itself restore the value of the original figure when it was introduced in 1971. That would require a figure much nearer £3,000. In addition, there has been no increase in the percentage of earnings which can be put aside. That remains at 15 per cent.
Thus, although there have been improvements, the provision that the self-employed can make for themselves is still trailing behind in real terms and is inadequate when compared with the financial provision allowed to employees in both public and private sectors—[An HON. MEMBER: "Civil servants]—ineluding civil servants. These reliefs, welcome though they are, are tiny in comparison with the new imposts applied in the last two years. That is why I suggest that we now have an opportunity in the new clause to do a little more on the national insurance side.
I recognise that this is not the time to debate the details of national insurance, and I merely say in passing that it is, of course, right that the self-employed, like other sections of the community, should help to meet the growing cost of benefits. I believe that the combination of the class 2 flat-rate contribution with the class 4 contribution, which is the nearest equivalent to the earnings-related contribution, is probably the best and fairest method of ensuring that the self-employed pay their fair share. But in assessing what that fair share should be, and in support of the new clause, I suggest that we have to take into account that the self-employed do not get all the benefits available in the National Insurance Scheme.
They are not entitled to the benefit of the Industrial Injuries Scheme or the earnings-related sickness benefit. If they travel abroad in the EEC, they do not have the medical and other benefits that are available to the Community as a whole. If one looks at their claims record, we all know from our own experience of the self-employed that they will go on working when many other people will be drawing sickness benefit

and taking a week off work. We also know that many of them continue working full-time long after the normal retirement age and, therefore, are postponing drawing their pension. We know, too, that many of the self-employed are also employers and have to pay the employer's contribution as well as that of the self-employed.
I know that the Government will say the national insurance position is being considered and that we must wait until that consideration is complete. If the Minister intends to use that argument, it really is not good enough. In the new clause my hon. Friends are not asking that the whole of the national insurance contribution for the self-employed should be tax deductible. We are simply asking that that part of it which corresponds to the employer's contribution should be tax deductible and that in this respect the self-employed should have the equivalent benefit which is available to the employer. When this subject was last debated in the House on 10th June last year, the Minister of State—who I am glad to see is here listening to the debate and is to reply tonight—also replied on that occasion. My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) moved an amendment somewhat similar to the clause I am now moving.
I want to quote just one of the arguments which the Minister of State used on that occasion, because I suspect that he will use it again tonight. The hon. Gentleman said:
As for the employer, he is in a rather different situation. He is not getting any benefits. By law, he has to pay part of these contributions in order to run his office; it is a business expense and it is wholly and exclusively paid for the running of his business, and so is allowable."—[Official Report, 10th June 1975; Vol. 893, c. 276.]
That, of course, is true, but I submit that it is only part of the argument. After all, the self-employed person has to find his contribution out of his own pocket. As I have said, he is often an employer as well, and being also an employer he has also to find the employer's contribution out of his own pocket. In this situation both these contributions are personal to him in his family business. The more he has to pay in contributions, the less there is for his family or to plough back into the business.
When we are dealing with the employer in a public corporation or a nationalised industry we are dealing with a very different situation. We are dealing in the first place, in the majority of cases, with a salaried employee. Even the so-called employer is a salaried employee. We should be talking not about an employer's contribution, but about a company contribution—a contribution which comes out of the firm and in no sense comes out of the employer's pocket. Indeed, the employer, in this instance, for national insurance contribution purposes is an employee like everybody else in the firm and, like everybody else, he should pay an employee's contribution and be entitled to the full benefits of the scheme.
9.45 p.m.
I submit that the analogy that the Minister used last year does not stand up. We ought to take into account the different levels of responsibility and, therefore, the relative burdens of the contributions on the individuals concerned. With the self-employed, the responsibility is more direct. It is more personal to the self-employed and to the small family business. I suggest that one way in which we can recognise this responsibility is by providing the tax relief proposed in the clause.
The final aspect which I should like to mention briefly is that of cost. The Minister will no doubt tell us what the clause would cost. I have made my own estimate of its financial implications. I made my estimates from a Written Answer in Hansard of 22nd May 1975. I calculate that the loss of revenue to the National Insurance Fund would amount to about £50 million a year. When we consider that the fund receives over £1 billion a year in contributions, I suggest that £50 million is a comparatively small sum.
We are talking about a proposal for this year. It is clear from the Government Actuary's figures that the National Insurance Fund will be able to meet its liabilities for pensions and other benefits this year without any increase in contributions. There are sufficient resources in the fund to do that. Therefore, it would be possible for the proposal in the clause to be put into operation without any increase in national insurance

contributions or any additional call on the taxpayer being required. It may be said that some increase may be necessary in the next year, but national insurance contributions are looked at each year when pensions are increased. If any small increase required to make up this loss of revenue were spread over all contributors, the increase would be so small that it would hardly be noticed by those concerned.
I suggest that if the Minister were to try to use the argument of cost, it would not stand up for this year, in view of the resources available in the National Insurance Fund, and it would not stand up for other years either.
This is a modest measure of additional relief that can be provided for the self-employed, who feel extremely strongly on this matter. If the Government were to concede the point, they would be doing something to redress the balance between the self-employed and the small business and employees generally. On those grounds, I commend the clause to the House.

Mr. David Mitchell: The purpose of the new clause is to correct an unfairness, to right a wrong, and to end a discrimination against the self-employed. I urge the House to support my hon. Friend the Member for Somerset, North (Mr. Dean).
I think that it is as well to remind ourselves of the background to the clause. When the Government took office, they undertook to increase pensions for the retired. We all recognised that that meant that there would have to be an increase in contributions to the National Insurance Fund, but none of us expected that that increase would be shared out so unfairly.
Under the increases which the Government brought in two years ago, the contribution of the employer was considerably increased. The contribution of the self-employed was savagely increased. The employee's contribution was reduced. The unfairness of reducing the contribution of the average employee, although at the same time savagely loading the contribution of the self-employed, aroused a wave of anger which was expressed by associations and societies such as the National Federation for the Self-Employed, the self-employed action groups and others


with which hon. Members will be familiar.
In this year's uprating of national insurance contributions the Government recognised that they had been unfair last year. They partly corrected the situation. However, I believe that they have not corrected it sufficiently, on two principal grounds. First, the benefits for the self-employed are markedly different. There is no unemployment benefit for the self-employed, although unemployment benefit under this Government forms a substantial call on the National Insurance Fund.
There is no sickness benefit for the self-employed while they are on holiday in Europe if they are in hospital. I am glad that the Government are looking into that matter. Perhaps the Minister will say whether any progress has been made in changing the arrangements so that the self-employed may benefit from free hospitalisation while they are in the EEC countries. So far the Government have not reported any move to the House. There is no redundancy payment for the self-employed. These important features are often undoubtedly overlooked by the Department when it inquires into the matter on an actuarial basis.
Many self-employed do not draw the benefits to which they are entitled. If a self-employed man who runs a corner store, sweet shop, or newspaper or milk round has backache, influenza, or ingrowing toenails, he does not visit the doctor, obtain a certificate, and go off work for a week or 10 days until he feels better. If he does that, he will find when he returns that his livelihood has been substantially damaged. What does he do? He continues working and recovers in due course. However, he will not have drawn the national insurance sickness benefit to which he is entitled and which the Ministry, I assume, takes into account when analysing the proportion of benefit attributable to the self-employed.
I refer next to retirement benefit. Many small business men for various reasons—perhaps because they cannot sell their businesses or because their business is their way of life—continue working long after their age of retirement and do not draw the retirement pension, which is the largest expense borne by the National Insurance Fund. There are con-

siderable reasons why the self-employed do not obtain full benefit at present.
My hon. Friend the Member for Somerset, North was right to move this clause. It will ensure that the self-employed are put in the same position as employees—that is to say, that half, or whatever the precise proportion is, of their contribution is not allowed against tax, although the other half is allowed. The self-employed should be treated in exactly the same way for tax allowances as the employee in relation to the employer's contribution.
Let it not be forgotten that to earn the additional amount required this year the self-employed person must earn a substantial sum gross at his top rate of tax to be able to find the net additional contribution. I think of people such as hospital consultants who are higher earners among the self-employed.
I urge the House to support the clause.

Mr. Dafydd Wigley: I support the clause. If I have a criticism, it is that it does not go far enough to help a group of people who have suffered so much over the past few years for various reasons, some of which can be attributed to the Government. Some are perhaps inevitable effects of the changes in the economly. Nevertheless, the people concerned need some redress.
However, I remind Conservative Members that it was their system, introduced in 1973, that opened the door to this possibility. It is possible that if they had had the benefit of hindsight, they would not have chosen the same system. They would certainly not have done so if they had foreseen how it would be used by the Labour Government. However, that is no reason for not supporting the clause and pressing the need for benefits to be made available to the self-employed.
If the figures at which the contributions were introduced two years ago were right then, the threshold of £1,600 must certainly be reviewed now if it is to be equitable. The way in which it is biting is having a severe effect.
Secondly, the benefits are severely restricted. Many of the self-employed would not be taking advantage of the benefits, because of the nature of their


work, unless they had to. It is inequitable that people should pay a bigger contribution and that the effort required to make the payment should be even greater when they receive only a portion of the benefits they should receive. If we believe in a Welfare State that meets people's requirements, that belief should apply equally to the self-employed and employees.
The self-employed have been hit by the cost of living in many ways, including the escalation of rates over the past three or four years, which has probably hit the small business man harder than anybody else. They have also been hit by changes in the taxation system. The introduction of VAT imposed an extra burden on them because of the extra bureaucracy. They have either had to pay somebody to deal with it or have had to work much longer hours themselves. The effect of inflation is often much greater on the small people, a factor which has been recognised in previous Finance Bills.
The clause is a small step towards alleviating the burdens on the self-employed. The Government are duty-bound to consider particularly the £1,600 threshold if they can say that they have sympathy wth people at the receiving end of the taxation system.
I hope that the clause will not merely be added to the Bill but will be carried by a large majority. Hon. Members on both sides of the House have constituents who come to them every month with this problem. It is no use giving them sympathy in our surgeries if we do not back it up tonight with our votes. I support the clause wth great enthusiasm.

10.0 p.m.

Mr. Geraint Howells: I declare my interest, having been self-employed all my life. My colleagues and I lend our support to the attempts being made to persuade the Government to accept the new clause, which will bring some relief to the self-employed and small businesses.
The self-employed sector has been the backbone of economic life in many parts of Great Britain, especially in my own area of Mid-Wales and counties like Carmarthen, Merioneth, Cardigan and

Montgomeryshire. Self-employed people have played a major role there in recent decades.
My hon. Friend the Member for Truro (Mr. Penhaligon) was told in a Written Reply in April last year that my constituency had a higher proportion of self-employed people than any other area of Great Britain. A total of 30·1 per cent. of my constituents are self-employed. In Montgomeryshire, the figure is 27·3 per cent. and in Carmarthen 25·9 per cent. Those are the sorts of levels in rural constituencies.
Many people do not realise that there are 1·9 million self-employed workers in this country. About 1·5 million of them are men—equivalent to 10 per cent. of the male working population. The 400,000 self-employed women represent 4 per cent, of the female working population.
It is interesting to note the percentage of self-employed people in various age groups. Seven per cent. of the self-employed are aged under 24, 20 per cent. are between 25 and 34, 47 per cent. between 35 and 54, 20 per cent. between 55 and 64 and 6 per cent, over 65. The regional distribution is fairly even except in East Anglia, the South-West, Wales and Northern Ireland.
Agriculture, the professions and service industries have heavy concentrations of self-employed people. For example, 20 per cent. of shopkeepers are self-employed, compared with 13 per cent. of farmers, 11 per cent. of professional people and 8 per cent. of construction workers. In addition, most of our authors, musicians and artists are self-employed. Many self-employed people are employers. About 4 million people work for them. That is why my hon. Friends and I are keen that the Government should accept the new clause.
There are many views about what the term "small businesses" should include. Some people mean firms with fewer than 200 employees, while others include all private companies. Statements about this sector can be misleading unless it is clear what criteria are being used.
Small firms have declined more in the United Kingdom than in any other industrial country, and there is a direct correlation between the health of the small business sector and general economic success. Countries like Germany,


Japan and the United States, with powerful Government Departments to promote the interests of privately owned companies, have a vigorous small business sector and much more successful industrial progress.
Many hon. Members share my view that the self-employed sector plays such an important role in the economic life of Great Britain that there should be a Minister to look after its interests and to ensure that self-employed people are able to employ more workers in an attempt to solve our unemployment problem. The Minister will be aware of the job creation scheme. Could he consider helping the self-employed to create jobs in that sector under a similar scheme? That would help to alleviate many of the problems of unemployment among the self-employed.
Successive Governments in the United Kingdom have encouraged large multiple economic units at the expense of small businesses. The scales are now weighed so deliberately against the individual that it is essential that the self-employed should be helped if this imbalance is to be corrected.
The decline of the small business sector is largely due to four factors—high taxation, the burden of legislation, unfair competition, and planning controls and development schemes. The self-employed in my view have few material resources and must depend on human resources. It is madness to kill off small businesses.
One vital asset provided by them is choice. Bigger is not necessarily better, and small is not only beautiful but efficient. To bureaucratic minds small businesses may seem untidy because the many disparate elements do not fit into neat packages.
One of the problems worrying the self-employed is the rating system. There is no Government subsidy for commercial rates as there is for household rates. In addition, the self-employed have worries about capital transfer tax and value-added tax. If New Clause 11 is accepted by the Government tonight, it will give a great deal of benefit and relief to the hard pressed self-employed.

Mr. Andrew Welsh: I support this new clause as a small con-

cession to the self-employed. Probably it is the Conservative way of making amends for introducing the 5 per cent. levy in 1973, which has now been raised to 8 per cent. and which should, in my view, be abolished.
The self-employed are badly in need of a boost. The small business man is harassed by the present economic situation and the burden of inflation. An additional problem which he faces is the fact that by definition a small business has a very small margin within which to work and therefore it is unable to take the heavy economic pressure put upon it.
Small businesses supply valuable goods and services and provide much needed employment. They need Government assistance to help with their problems. At the moment they have to soldier on under a taxation structure which seems to be designed to prevent a man from going into business. The tax system is capriciously designed to hinder instead of help. There is also the burden of Government-inspired paper work and the apparently meaningless yet constant demands of form filling on men who simply want to go about their business of supplying goods and performing services. The Government cannot be unaware of the small business man's intense dislike of the value-added tax system, which has turned him into an unpaid tax collector.
Then there is the 8 per cent. levy and the national insurance anomalies which have engendered a great deal of anger and frustration among members of this economic group. The SNP has long made obvious its total opposition to the 8 per cent. levy. The sooner it is abolished, the better. If, however, the Government and the Conservative Opposition insist on keeping this levy, let them give back some value for money to the self-employed.
Anomalies such as the Common Market reciprocal health agreements create a great sense of injustice among the self-employed, who are the only exception to the rights and privileges taken almost for granted by every other citizen. No wonder there is a reaction which the Government now face from the self-employed.
It is ironic for a Scottish doctor to go to a Common Market country and be unable to take advantage of health agreements, while at the same time having to treat people who come to this country from the Common Market. Even small

taxation concessions such as those proposed will taste very sweet indeed to the self-employed and to small businesses.
Therefore, I am happy to give the new clause my support as a very tiny step in the right direction.

Mr. Peter Mills: I am grateful for the opportunity to say a few words. I am certainly not an expert in this subject but I have one or two small points to make, particularly concerning the self-employed in the rural areas.
The main theme of my hon. Friend the Member for Somerset, North (Mr. Dean) when he opened the debate was the need for encouragement to be given to the self-employed. The self-employed have been a pretty discouraged lot for some time. I believe that what my hon. Friend said was absolutely right. The self-employed need encouragement. They need help. That is why I am prepared to support the clause tonight in regard to relief for the self-employed. It would go some way to help this section of the community. Over the past few years the self-employed have certainly had a very difficult time. It has been a struggle to survive. I do not believe that the Government have created the climate in which these people can flourish.
The House must recognise that we need the self-employed. We certainly need them in the rural areas and the small towns. The self-employed and the small family businesses have done a tremendous job in the rural areas, and in particular in my own area. They not only provide a service. They provide employment as well for many other people.
In our villages we benefit from the efforts of the small shopkeepers, the small farmers and the small businesses of every sort. We have especially benefited from the sorts of business which, unfortunately. have had to cease trading lately, in particular the small garages and agricultural repair shops which service the rural community. We have seen them go out of business over the years because of the difficult climate in which they have been trying to operate. I believe that they need to be encouraged for the benefit of the community as a whole, and in particular the rural areas, especially in relation to the problem of employment.
It is a very real tragedy when a small garage or agricultural repair depot or shop goes out of business. We usually find that there are two or three other people who are out of work as well, so that it

is extremely difficult then for people to find alternative work. Unless something is done, in many instances the rural areas —I do not wish to exaggerate—will be in trouble and depopulation will continue. Not only do we need these people. We want to stop the depopulation of our rural areas, which is taking place on a quite alarming scale. Only those who have a constituency which is affected know exactly what I mean. I believe that this depopulation and drift away from the rural areas is wrong. It is not what is wanted. It must be stopped. The small measure we are thinking about tonight would, I believe, help to arrest that position.
10.15 p.m.
I hope that I shall not be out of order, Mr. Speaker, in saying that the clause is not the only help to the self-employed that is needed. Much more needs to be done in taxation, rates and many other respects to create a better climate so that the self-employed may continue in business. My hon. Friend the Member for Basingstoke (Mr. Mitchell) was right in saying that the present position was unfair. As I said, I am not an expert in these matters, but my hon. Friend is, and the House would do well to listen to what he and my hon. Friend the Member for Somerset, North said tonight. The clause would help to rectify the unfairness which my hon. Friends have described.
We can no longer take for granted that self-employed people will continue in business. Enough is enough. Many are sick to death of the position they are in. It is easy to say that Mr. Mills the grocer or Mr. Mills the agricultural engineer will continue to stay in business because he has to go on, but unless something is done to encourage and help him he will not continue in business. We need the self-employed in rural areas probably more than anywhere else. The Minister should not take them for granted. It gives me great pleasure to support the clause.

Mr. George Cunningham: I shall be brief. In speaking on this subject I am conscious that I am bound to say things which I have said many times before in the House over the past two years when


the subject has been debated repeatedly. I am also conscious that there is something about this subject which brings out the worst in some of us and perhaps in all of us.
It is desirable that to the maximum extent we should identify the area of agreement that exists with regard to the self-employed between those who disagree on other aspects. There should be complete agreement that on the whole the self-employed perform an essential function for the country and that they have some special qualities which are particularly worthy and which should be admired, respected and mentioned.
It should also be said that because the self-employed pay tax under Schedule D they have legitimate opportunities for escaping their tax obligations and postponing the payment of tax. The fact that the self-employed have those opportunities is no reason why we would be justified in imposing penal conditions to counterbalance those advantages in another aspect of the treatment of the self-employed. In those two respects there should be general agreement, and we should concentrate on the points on which we disagree.

Mr. David Mitchell: The hon. Gentleman said that the self-employed were escaping their tax obligations. That they pay their tax later instead of earlier may be an advantage, but to say that they are escaping their obligations is a charge which I hope that on reflection the hon. Gentleman will withdraw.

Mr. Cunningham: I would withdraw it if I had made it, but I did not make it. It is incontestable that anyone who pays tax under Schedule D has the advantage of paying tax some time after—often quite a long time after—he has received the income. Anyone who is sane would prefer to get income first and to pay tax later. That is the advantage that a self-employed person enjoys.
The self-employed have greater opportunities than others to inflate their expenses. Some take advantage of those opportunities. After all, we were not born yesterday. We know that some people will take the opportunity to reduce tax obligations. It may be that even one or two hon. Members know of

someone who has taken advantage of that situation. We know that such opportunities exist. Some self-employed persons take them and others, to their great credit, do not. But that does not matter for the purposes of the present argument. It would not be right to balance an advantage in one sector against a disadvantage in another.
The new clause, looked at in isolation —I have said this in much greater detail in Committee in the past—is correct. Of course it is true that the self-employed should get tax relief on some part of their contribution. The wording that the hon. Member for Somerset, North (Mr. Dean) has chosen roughly reflects the proportion on which they should get tax relief. It puts them in a situation comparable to that of the employee and the employer, the employee getting no tax relief on his contribution and the employer getting tax relief automatically on his contributions. If the self-employed person were paying the proper gross contribution the clause would be right, and in isolation it is right anyway.
The self-employed person should enjoy this tax relief, but if—I stress "if"—under present regulations he is being asked to make a gross contribution which is too low, that is something that it is legitimate to take into account. If a self-employed person is contributing less to the National Insurance Fund and yet continuing to take out of it what he is now taking out, or more, that can only mean that other contributors to the fund—namely, employees and employers—will have to contribute something more. If that situation continues, it will show up a larger deficiency in the National Insurance Fund. We cannot give that advantage to the self-employed without taking the cost of it from the other contributors to the fund.
This all depends on whether the self-employed are currently being asked to pay too little or, as most hon. Members seem to agree, too much to the National Insurance Fund. I have no intention of going over all the arguments that others and I have gone over before on many occasions as to whether the self-employed pay enough into the fund for what they get out. There are certain facts that are beyond dispute. First, the self-employed do not get all the benefits that are paid for from the National Insurance Fund.


However, the benefits they receive are those that are the most expensive, except for unemployment pay. The benefits to which they are entitled constitute approximately 85 per cent. of the outgoings of the fund, but the contribution they make is not 85 per cent. of the total of employers' and employees' contributions. In logic, that is what it should be.
If we were prepared to make a change in the gross contribution due from the self-employed, it would be right that tax relief should be given. The net effect of doing both things would be to leave the burden on the self-employed not all that much different from what it is now. The people who would benefit from the change would be employees and employers, whose burdens would fall. It would be the Treasury which would suffer. It would be contributing a higher proportion to the National Insurance Fund than at present, and it is high time that it did. The Treasury is the real villain of the piece, not employees and employers.
I am glad that the hon. Member for Basingstoke (Mr. Mitchell) has at last come round to the point which I have been urging upon him for the last couple of years—namely, that the self-employed must, in common sense, retire a bit later on average than others. The Department of Health and Social Security admitted that the self-employed retire, on average, one and a half years later than other people. The Government should attempt to give that some actuarial expression to justify lowering the contribution below the 85 per cent. figure.
In talking to the self-employed, I have found that they feel very het up indeed about the subject. They are not led to think about it more clearly or to understand the facts about it any better by the excited ravings in which some Opposition hon. Members too easily indulge. It is our job not to encourage wrong ideas about the contributions but to try to get the people to whom we talk to understand the facts and to try to correct the relatively small anomalies that exist.

Mr. Kenneth Clarke: The hon. Member for Islington, South and Finsbury (Mr. Cunningham) may be actuarially and mathematically right, but he will find that the self-employed do not accept the bogus insurance basis on which their contribu-

tions are based. We have heard earlier in the debate about national insurance funds which are notional and do not exist except as an accounting device. The contributions are regarded by the self-employed as a social security tax, and they will not accept the hon. Gentleman's argument. They are outraged by the way in which this tax has been handled by this Government, which means that they now pay a higher proportion of their earnings than does an employee. All the sophisticated actuarial, academic arguments will not reassure them that the system is correct. We should abandon the present so-called insurance system and adopt a social security tax system. That is what it really is.

Mr. Cunningham: The hon. Member for Rushcliffe (Mr. Clarke) has proved one of my points. He said that the self-employed will not understand and that they feel that this is an outrage. I know that they are outraged. That, however, is not the question. The question is, are they right to be outraged? We have a duty to establish the facts. There is nothing wrong with actuarial proceedings. If one changes the contributions of the self-employed, one must alter the contributions of the employers and the employees.
The hon. Member for Somerset, North said that one could give advantage to the self-employed at an infinitesimal cost. As I said before, that is what I call the Zachariah fallacy. It is the notion that one can take people whose names begin with "Z" and absolve them from all tax and other contributions, because other people will have to pay only a small amount to make up for it. That is not fair. We should work out the proper gross contribution that the self-employed should pay to cover the benefit to which they are entitled.
Subject to the qualification by the hon. Member for Basingstoke that the self-employed must marginally tend to retire later and that they probably make use of sickness benefit less than other people, when there is a gross contribution on that basis, we should then remove the anomaly that the self-employed are not entitled to the tax relief to which employers are entitled.

10.30 p.m.

Mr. Giles Shaw: I intervene briefly because I should like to take up


what the hon. Member for Islington, South and Finsbury (Mr. Cunningham) has said. I accept that if we look at the matter in strict actuarial, mathematical terms, there is a distinction in the way in which we have so far looked at the problem of the self-employed and the contribution they are prepared to pay for the benefits they obtain. Where I part company with the hon. Gentleman is that I believe that the position of the self-employed, as a sector of contribution to the economic effort, has been gradually eroded over the years. That is the context in which it seems to me that there is basis for supporting the new clause.
What the self-employed are arguing is that in practically every walk of life they have a contribution to make. They do not seek to isolate themselves and say that they provide all the services for the community in this or that profession or industrial activity. What they say, and where we as a House must agree with them, is that in practically every walk of life, be it professional, industrial, manufacturing, service or distribution, they offer a proportion of the services available to the consuming public and that that proportion has brought them less satisfactory returns.
We look at the employer and the employee in the generality of industrial development and say that, of course, industries should be given a subvention to make them profitable, to help them to retain employment and to help them with their stock appreciation and tax. But as long as this criterion is available at levels that the self-employed cannot reach, they feel that as a sector in our economy they are less than adequately recompensed. When it comes to the matter of simple assessment of contributions, it is the background information as to the way they are treated which in my judgment affords a real lever on their behalf in support of a new clause such as the one we are describing.
I know of no major industry which is not significantly dependent upon self-employed persons. I think in particular of the distribution of manufactured goods. Reference has already been made to services such as those provided by garages or the professional services of accountants or lawyers. But the whole distribution

system is largely dependent upon the self-employed. It is not easy merely to separate our responsibility for ensuring that we maintain adequate services and distribution from our responsibility for maintaining adequate services in manufacturing industry and employment. It is the imbalance in attitude to those who are employed in industry and services which adds extra weight to the arguments we are seeking to put from this side of the House.
I fully understand that the Government must be concerned that, if a con. cession is given for this particular group of taxpayers or insurance contributors, it must mean a re-spreading of the burden. Obviously that is understood. But the question is whether the total national well-being would be that much marginally better or worse off as a result of the redistribution. We are involved in a balancing act. We are involved in taking a decision as to where the balance of advantage would lie.
I suggest to the Minister that the Government's main concern at this time must be the generation of wealth. It must be the recovery of activity within the economy. Given that as a global objective, the contribution which the self-employed make can, and should, be formidable. To encourage it to be so is a legitimate objective of the Government, and certainly of the Opposition.
The self-employed also, by definition, give services. They generate wealth and they provide employment. That is exactly the contribution which major manufacturers also make. But why should we regard the sector which is labelled "self-employed" as being somehow a sector which does not deserve as much encouragement as we are prepared to give to the manufacturing sector. Traditionally, the only answer has been that they have substantially less power than people employed in industry. They do not have the major trade unions backing them. That is the biggest simple differential between the self-employed and the employed. In management or in the work force, there are organisations which are prepared to operate to the advantage of the employer or of workers. The self-employed, through their general movement, have now corrected this imbalance. The House


must recognise this and accept the new clause within the niceties in which it is drawn. I believe that the principle that the clause would create is far more important. It is that this House must come to terms with the contribution that the self-employed make to our economy. It must recognise that the contribution is just as valuable as the contribution made by the major manufacturing sector, and it must recognise that the organisation of the self-employed has now reached a point at which the House must give due regard to its aspirations and give it encouragement. It is the encouragement of the self-employed that is behind the new clause, and that is why it deserves full support.

Mr. Robin Maxwell-Hyslop: Government supporters seem to be trying to have it both ways. On the one hand, they say that the benefits to which the self-employed are not entitled but to which employed people are entitled are not expensive benefits to provide anyway. On the other hand, they refuse to make them available to the self-employed. They cannot have it both ways.
The new clause not only stands on its own feet: it is also part of a general redress of grievance. After all, the selfemployed—farmers and garage proprietors—have accidents at their work, but they are denied industrial injury benefit and graduated sickness benefit. If Labour Members say that these benefits do not cost much anyway and, therefore, the self-employed are not entitled to any reduction in contribution, why not allow them to have these benefits?
We have pressed this point time and again, but the Government have not lifted a finger to extend these benefits to the self-employed. We are therefore constrained to fall back on another form of redress, which is to allow them to have tax relief on their contributions, which is analogous to the tax relief which would be received by an employer on the employer's contribution.
The bogus 85 per cent. figure which is bandied about appertains, of course, to the gross contribution by an employer and an employee before the employer receives tax clawback on it. The self-employed do not pay 85 per cent. of the net total contribution of employer and employee combined.
I do not know the exact figure—it will vary from firm to firm, and a firm which is not making a profit will not secure clawback because it is not paying tax—but the generality of firms which are profitable are, of course, receiving tax clawback in respect of their employer's contribution.
The hardship which the self-employed suffer is not confined to this element of taxation. And we are talking about a tax. It is dressed in the trappings of a social security charge but it is a general tax, just as for many years an illusion was perpetrated by the Treasury that the annual tax on a car went into a Road Fund. It was referred to as the Road Fund for many years after such a fund ceased to exist. It was simply a vehicle for raising money. The 8 per cent. surcharge which the self-employed are called upon to pay is just another vehicle for raising money.
Therefore, the first question to which we address ourselves is whether this is a reasonable way of raising money from the community in general. The second is whether it is reasonable to confine this vehicle for raising money to one category of people—the self-employed—and not extend it to other categories with the same income.
Is it now in order to justify a positive answer to that which the Government clearly hold: that it is necessary to establish the proposition that a group of people who on average work longer than employed people, who take greater risks than employed people and who, unpaid, collect tax for the Government in a way that employed people do not should nevertheless be singled out for this unique tax? We should like to place them in the same position as other people who are earning their livelihoods.
But the clause does not do the whole of that. It refers to the contributions being tax deductible. That is a minor request to make of a Government who have imposed this tax on this restricted group of people. The clause should commend itself to the whole House, irrespective of individual Members' political affiliations.

Mr. Robert Sheldon: We have had an interesting debate with echoes of that


which took place on a previous occasion last year. When the hon. Member for Somerset, North (Mr. Dean) dealt with the problems of the self-employed, he naturally found a great deal of sympathy in the House. The hon. Gentleman talked about the value of their work and the ideals that embody so many of the aspirations of small businesses. The hon. Gentleman also echoed the comments of my hon. Friend the Member for Penistone (Mr. Mendelson), who last year, in a very moving speech, pointed out the particular role of the small business man. with his roots in the community, having his customers located in that community and offering initiative and enterprise both to his customers and to the area in which he lived and worked.
It is no surprise to anybody who looks at these matters dispassionately that we have the work and the interest of the self-employed very much in mind. We certainly see them as a fundamental, necessary and important part of our whole industrial set-up.
In fairness, the hon. Member for Somerset, North went a long way towards recognising these points when he went so far as to accept increases in national insurance contributions as being necessary. He fairly pointed out the improvements that have been made to the limits for tax relief on retirement annuity contributions, and he might have added the simplified schemes for VAT and a number of other matters of importance to the self-employed that probably lie outside the main confines of this debate.
I think that we all understand and recognise the importance of the self-employed. At the same time, we must consider certain consequences that arise from the new clause.
It provides for tax relief for the self-employed covering that part of the national insurance contribution that corresponds to the employer's share of the employee's contribution.
We must decide at an early stage what are the critical questions that we need to ask. The nearest we got to that was in a speech of notable clarity by my hon. Friend the Member for Islington, South Finsbury (Mr. Cunningham), who dealt with the kernel of the whole question. We must consider not only what contributions

the self-employed pay but what benefits they are entitled to and what they actually get. We have to look at how the benefits to which they are entitled and the benefits which they take up compare with the actual cost of running the scheme.
10.45 p.m.
One complication strikes us at the outset. Many of these people are not self-employed all their lives. However, let us leave out that complication. If the self-employed paid the full cost of the benefits to which they are entitled, they would pay roughly 85 to 90 per cent. of the combined class 1 contributions. Even at the new level of contributions, they will be paying no more than about 70 per cent. of the corresponding contributions payable for employees for the same benefit. We may compare the 8 per cent. payable by the self-employed with the 14½ per cent. payable by the employee and employer together. When we allow for benefits to which the self-employed are not entitled, that figure of 14½ per cent. would be reduced to approximately 12 to 12½ per cent., against which they pay 8 per cent. That is one important statistic. It is not the final statistic, but it is important in view of the line of argument that we need to pursue.
My hon. Friend the Member for Islington, South and Finsbury, in a notable contribution that will repay careful study, divided the contributions payable by the self-employed into two parts, equivalent to the contributions payable firstly by the employee, and secondly by the employer who has his part of the contribution allowable for tax. I do not think that I go along with him on this point. However it certainly must be considered.
My hon. Friend asked that the self-employed should pay their full national insurance contributions. But, if I understood him correctly, he made two provisos: first, that their contributions should be reduced by reference to the proportion of the benefits to which they are entitled, and, secondly, that the contribution should be further reduced by the proportion of the benefits which they do not take up for various reasons, some of which were put by the hon. Member for Basingstoke (Mr. Mitchell). The hon. Gentleman made the point, which we fully accept, that, although the self-employed are not liable for the same level of contributions, they do not—this is on


the basis of our own calculations—take up all the benefits to which they are entitled. They are not entitled to unemployment benefit, so they cannot take it up.
On the question of sickness benefit, it is much harder for the self-employed to close their businesses than it is for employees to stay away from work when they are ill. From our own experience, we know that in many cases self-employed people tend to retire later as they may have a contribution to make in the running of their businesses. Whether they retire later for reasons of involvement or finance, or because they want to make fuller provision for their own retirement, in cases known to us individually their retirement age tends to be later.
The 8 per cent. payment by the self-employed has often been called a tax. But social security and retirement benefits must be paid for out of contributions. We must address ourselves to the question of what is a fair and reasonable contribution that should be made by the self-employed.
The self-employed receive benefits. There is no tax relief for their contributions. The employee receives benefits and there is no tax relief on his part of the contribution. On the other hand, the employer receives tax relief on his part of the contribution but receives no benefit himself. That aspect fits in quite well.
I now turn to the benefits that the self-employed receive for their contributions. I shall not go through the large number of benefits that were pinpointed by the hon. Member for Basingstoke and others. However, the self-employed are entitled to receive the most expensive benefits. Three-quarters of the cost of all national insurance benefits is for retirement pensions. That is by far the most important aspect.
We need to know not only the benefits to which they are entitled but to analyse the benefits that are being taken up. I hope to see the results of an inquiry into the position of the self-employed which, I understand, the Department of Health and Social Security is carrying out. I think that it will make clear the advantages which I believe the

self-employed receive and which I have no wish to diminish.
Although I sympathise with the objective of the clause, I do not think that it is the way to proceed. When we understand the relationship of costs to benefits, we can have a debate rather more fundamentally directed to the main problems.

Mr. David Howell: The Minister gave a sad response to a debate in which the voice of Britain as a whole was heard. We have had speakers from every corner of the United Kingdom except Ulster, which is a pity, because Northern Ireland has many self-employed who have played a magnificent part in preserving the economic fabric of the Province against terrorism.
We had first an excellent speech by my hon. Friend the Member for Somerset, North (Mr. Dean), who, together with my hon. Friend the Member for Basingstoke (Mr. Mitchell), has played a powerful part in bringing to the attention not only of the House but of the whole Whitehall machine the interests of the self-employed and smaller businesses in a way which was not appreciated by the political parties in the 1960s. My hon. Friends deserve credit for their part.
My hon. Friends were joined by the hon. Members for Caernarvon (Mr. Wigley), Cardigan (Mr. Howells) and South Angus (Mr. Welsh), from the smaller parties, who explained the enormous significance of the self-employed in their areas. We are dealing with a major army, not a small minority that can be swept under the carpets of the makers of national strategies. They have a significant part to play in our economic recovery.
The hon. Member for Islington, South and Finsbury (Mr. Cunningham) and my hon. Friend the Member for Pudsey (Mr. Shaw) both reminded us, for rather different reasons, that we should look at the problem of the self-employed and their national insurance contributions as a whole. That is the right approach. It should be seen in the context of their overall position. If we look at it narrowly, we are inclined to come to too arithmetical and narrow conclusions.
The self-employed have been a forgotten army in the making of national


strategy. They have heavy tax burdens. We all do, but they have special difficulties. They have burdens resulting particularly from the administration of VAT. Dramatic and strong feelings about the matter have been discussed recently, and we shall debate it later. The self-employed have hanging over them the notorious and poisonous Section 20B in Schedule 6, which allows tax inspectors to break into people's houses at night on income tax matters. These are threats to the self-employed, as they are to other people.
On top of that, the self-employed—certainly those who are small employers as well as being self-employed—have major burdens of legislation. Above all, they are an enormous group who have yet been totally overlooked and excluded by the metropolitan-minded Whitehall and Westminster makers of economic policy. That is the negative side of their position. We have been round the course on benefits many times and discussed their contribution rates and the benefits they receive. We know that they do not get unemployment benefit or injury benefit and that they tend to retire late, so that they do not torm the full burden on State funds of retirement at the normal time.
My hon. Friend the Member for Basingstoke graphically reminded us that the work of the self-employed is never done. They cannot knock off whenever they wish. Their work goes on continuously. If they stop, their earnings stop. The hon. Member for Cardigan suggested that we might be dealing with as many as 1·9 million people, nearly half of whom are also employers, employing another 4 million people.
When Labour Members below the Gangway say that cutting public expenditure would reduce employment, we should say that if they are looking for jobs let them look to this sector. Jobs could be provided here if there were a return to profitability and a reduction in interest rates and if legislation did less to prevent people taking on hands. That is why this is such an important debate and why this sector and these people will be ignored at our peril.
We have argued the niceties of the 85 per cent. and other arithmetical points

about the relationship of the contributions and benefits of the self-employed. It is now time not for an interdepartmental inquiry—which seems to have been hanging in the air for a long time—but for a full public inquiry into the contribution levels in relation to benefits, whether they are justified and how they compare with the benefits received by other sections of the community. The self-employed and their representatives, in their increasingly strong and vocal organisations, should be able to give evidence. Let us have the whole thing out and consider it objectively.
This sector should be greatly supported. Where were these people when the grand strategists sat down at the Chequers weekend to carve up the nation? What annexes to White Papers have they written? We know the answer —none. They do not fit into the Socialist strategy of a corporate State or into a national plan.
It is sometimes said that we should help these people, but they are not the sort to ask for help. They ask merely that the penalties and unfairnesses should be lifted from them and that they should have a fair deal. They ask not for help or grants, but for fairness.
We should have a public inquiry. This has been a valuable debate initiated by my hon. Friend the Member for Somerset, North. I advise my hon. Friends to demonstrate our feelings on this matter by voting for the new clause to show that we care for these people.

Question put, That the clause be read a Second time:—

The House divided: Ayes 182, Noes 200.

[For Division List No. 242 see col. 615]

Question accordingly negatived.

WAR WIDOWS' PENSIONS: 50 PER CENT. EXEMPTION

'For the purposes of calculating taxable income, the first 50 per cent. of war widow's pension shall be exempt'.—[Mr. Kilroy-Silk.]

Brought up, and read the First time.

Mr. Robert Kilroy-Silk: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this we may take the following new clauses: New Clause 2 (War widows' pensions), New Clause 26 (War widows' pensions: 51 per cent. exemption), and Amendment No. 230, in Clause 29, page 16, line 43, at end insert—
'(3) In section 8(1) of the Taxes Act, after paragraph (a) there shall be inserted the following paragraph:
(aa) in the case of a claimant who is

(i) in receipt of a national insurance widows' pension, a war widows' pension or a national insurance retirement pension; and
(ii) is not entitled to claim relief under section 81(1A) of this Act (age allowance), section 12 of this Act (widower's or widow's housekeeper), or section 14 of this Act (additional relief for widows and others in respect of children)
to a deduction from the income tax with which she is chargeable equal to income tax at the basic rate on £835'.

Mr. Douglas Crawford: On a point of order, Mr. Deputy Speaker. Am I right in assuming that, for those of us who would like to see 100 per cent. exemption from taxation given to war widows, you will allow a vote on our Amendment (a) to New Clause 13?

Mr. Deputy Speaker: The selection has been made by Mr. Speaker and the only vote will be on New Clause 13.

Mr. Kilroy-Silk: If the hon. Member for Perth and East Perthshire (Mr. Crawford) had attended the proceedings in Committee we would have got the 50 per cent. exemption, so it ill becomes him to raise the matter now.
The clause seeks to exempt 50 per cent. of the war widows' pension from tax. It is a small, moderate and very justifiable concession, particularly in view of the fact that this year for the first time the war widows in receipt only of a wat widow's pension have come into the tax bracket.
For example, a war widow's pension is now £17·20. It will go up, admittedly, to £19·60 in November, but that increase will be taxed and the net increase that the war widow will receive in November will be 22p. This I believe to be unjustifiable. It is totally wrong and inappropriate for us to be taxing individuals who were never intended to be taxed and who were never expected to fall within the tax bracket.
11.15 p.m.
The new clause affects 65,000 war widows from the Second World War and 25,000 war widows from the First World War. I believe that war widows have a special case and that they are different. It is an emotional case. I do not apologise for that, because emotion has a place in politics and politics is the better for it.
No amount of money can ever compensate for the unique circumstances of the bereavement suffered by war widows. The sacrifice their men made was a unique and irrevocable sacrifice, and it ill becomes the country to show its gratitude for that sacrifice by giving with one hand a war widow's pension and taking it away with the other by taxing it. I would expect the country to show gratitude by treating war widows as a special case, but that does not happen at the moment.
I do not think that money can adequately compensate a woman for the death of her husband in the First or Second World War, for the loss of companionship, the loss of the opportunity to build a future together and the loss of memories she might have had. That, I accept, is an emotional argument which one either does or does not accept. It is perhaps not susceptible to intellectual argument.
War widows have received a particularly bad deal. There are 5,000 war widows who live on supplementary benefit. That is a poor reflection on a so-called civilised society, let alone an expression of gratitude for the lives that were laid down. The war widow's pension compares ill with the amount paid to the widows of men killed in Ulster. I do not begrudge the £38 a week paid to widows of Service men killed in Ulster, but I do not see how we can value widows at £38 in that context and widows of two world wars at only £17. There is little justice in that kind of distinction.
There is also an anomaly in that the war widow's pension is taxed whereas the war disability pension is not taxed. If a man loses his life, his widow receives a pension which is taxed, but if a man lost a limb or was wounded during the war he receives a war disablement pension which is not taxed, however much he earns. Indeed, the position is even more bizarre, because there are new war


widows every year from the Second World War. The man may have been in receipt of a war disability pension tax-free irrespective of his income. When he dies, that war disability pension is commuted into a war widow's pension and becomes taxable.
My hon. Friend the Financial Secretary to the Treasury attempted to explain that discrepancy in a parliamentary reply. He said:
War widows' pensions are a form of income like other pensions paid to widows; but a war disablement pension is specifically exempt from tax because it is regarded as compensation for injury suffered by the recipient in the performance of his duties."—[Official Report, 24th May 1976; Vol. 912, c. 94.]
Why is a pension awarded for death or permanent loss regarded as income but a pension awarded for disability regarded as compensation? If a disability pension is regarded as compensation and is tax-free, equally a war widow's pension should be regarded as compensation for a life that can never be regained and should similarly be tax-free. It is a strange use of language to attempt to defend that anomaly in that way.
There is also the arugment of comparisons. We alone of the Western industrialised countries treat our war widows in such a peremptory and shoddy fashion. Virtually all the Old Commonwealth countries, and most of the New Commonwealth, exempt war widows' pensions from tax. War widows in Germany are paid a sum equivalent to £50 a week tax-free. I do not accept that we have to do necessarily as other countries do, and I do not accept that international comparisons are always relevant or valid. but I should like to think that we can lead in this area rather than fall behind to such an extent.
The clause affects a relatively small group of elderly women living in their declining years. They could all be accommodated in a fair-sized football ground. They are the forgotten women. The cost would be minimal. My hon. Friend the Financial Secretary will no doubt talk about upwards of £10 million, but the more reliable estimates suggest about £3½ million at the most. If we can spend £10 million to change road signs in Wales I should say that £3½ million for the war widows would be

much better value for money and a much more worthy cause.
I began by saying that this is an emotional argument. However, it has a place to play in politics. I am sure many hon. Members will accept and recognise that there are strong feelings outside the House on the issue. They are feelings that perhaps we should take into account. Perhaps we should also take into account that they are feelings that were once supported by my right hon. Friend the Chief Secretary to the Treasury, when he said:
If it were not for the lateness of the hour, I am sure that all my hon. Friends would have wished to support the strong case in support of the war widows.
He continued:
Most of us in our constituencies have received representations about this matter and we know the strong feelings that are justifiably felt by war widow pensioners."—[Official Report. Standing Committee H, 23rd May 1973; c. 706.]
I ask for support from both sides of the House for this essentially non-partisan matter. [Interruption.] My hon. Friends laugh mockingly, but I do not see why it is not a non-partisan matter. I do not see why there is any difference in politics between one party and the other on this issue. Every hon. Member is concerned about the position of war widows. I do not see how my hon. Friends can mock.
I accept that there are drawbacks in the clause, and I accept that it would create an anomaly, but there are many other anomalies that bedevil our whole social security and tax structure. What is another anomaly, especially if it is a justifiable one, among friends? I accept, as my hon. Friends have been intimating in their mutterings behind me, that there are other groups who are equally disadvantaged, but I believe that war widows have a special case. That might be because my mother was a war widow.
I accept that there are other categories of individuals and groups in a position that we wish to rectify, but that does not preclude us from doing anything for them if we do something for war widows tonight. Such groups are not mutually exclusive. There are those who insist that if we do something for war widows we shall not be able to do anything for anyone else, but I submit that they are wrong.
My right hon. Friend the Chancellor of the Exchequer has already stated that he will not collect the tax that is already provided for on war widows' pensions this year. Like my hon. Friends, he is alarmed at the distress and confusion that has been caused among war widows by receiving a tax demand notice this year for the first time in their lives. My right hon. Friend has said that he will not collect the tax. If that is the position, I cannot see why there should be any opposition to the clause. Certainly we are creating a confusing and anomalous situation if we say that war widows are eligible for tax but that we shall not collect it.
I believe that we should rectify the present position by accepting the clause. I believe that if it were accepted it would partially resolve the situation.

Mr. Graham Page: It will come as no surprise to the hon. Member for Ormskirk (Mr. Kilroy-Silk) to learn that I wholeheartedly support him in the new clause which he has so efficiently moved. If the vote on tax relief for war widows' pensions were a vote in a national referendum the Ayes would have it, because it is a popular idea in the country. If it were a free vote tonight, the result would be the same.
Those who doubted the proposal in the past will have had their doubts dispelled this year, because the tax threshold means that many war widows receiving only widows' pensions are now, for the first time, paying tax. That is perhaps the reason for the strength of feeling in support of tax relief for war widows' pensions. Those of us who have pleaded for that relief over many years find that this year the arguments have built up, brick by brick, until they are unassailable.
The cost of the relief becomes smaller year by year, death by death, and it becomes cheaper each year to remedy the wrong. In Committee the Financial Secretary said that acceptance of a similar amendment moved by the hon. Member for Ormskirk would cost £10 million. I cannot believe that figure to be right. In November a war widow will receive £19·80 a week. Out of that sum she will pay tax of £2·38. If one rounds up that figure to £1·50, it totals £130 a year.
The Government say that there are 90,000 war widows. That figure must

be wrong, because two years ago we were told there were 80,000 war widows and they have been reducing by about 7,000 a year. The present number most, therefore, be nearer 70,000 than 90,000. Simple mathematics shows that if they were given 100 per cent. tax relief it would cost about £9,750,000. Some war-widows pay tax at a higher rate, and the set-off would be the saving to be made from the 5,000 who are now receiving supplementary benefit and the administrative cost of that.
The anomaly of the war disability pension being free of tax and the war widow's pension being taxable came about accidentally in 1919 and we have perpetuated it ever since. But that is not the only anomaly. A war widow can receive the first child dependant allowance and subsequent child dependant allowances free of tax. She can also receive education allowances free of tax.
We can only be ashamed of the comparison which the hon. Member for Ormskirk drew between war widows' pensions and tax in this country and the situation in almost every other country in the world. It is difficult to persuade the war widow in this country that she is so much less worthy than her German counterpart or her counterparts in Commonwealth and other European countries.
Although this may be an emotional issue, I do not think that the argument is any the worse for that. The time has come when the argument for giving tax relief to these widows is so strong that I was hoping that the Minister would say "We accept the argument. We accept it not for 50 per cent., as proposed in the clause, but for the full 100 per cent." In that way we would be doing justice where in the past we have done great injustice to war widows.

11.30 p.m.

Mr. J. W. Rooker: I wish to make three points in what will inevitably be a brief debate. The first point is an obvious one. The right hon. Member for Crosby (Mr. Page) was a Minister in the previous Conservative Government, and they did nothing about this problem over the years. In mitigation—it is the only point that can be so made—while war widows were always taxed, for instance when


they were working, the current position never existed when the Conservatives were in Government. The tax threshold was not mixed up with the basic pension. All that my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) is seeking to do is to restore the position to what it was when the Government took office.
My second point brings home the tragedy of the circumstances of these people. I had a bad example of the difficulties. An 85-year-old woman, widowed as a result of the First World War, has just received an income tax form for the first time in 25 years, since she was 60. I had to fill it in for her because she was incapable of reading the explanatory leaflet. It was not printed in type large enough for her to read. That brings home the dilemma facing my hon. Friends who wish to change the situation. That widow asked me what could be done for her. Clearly, something has to be done. To his credit, my hon. Friend has taken the bull by the horns.
My third point concerns the cost of this proposal. On an examination of all the evidence, the cost appears to be about £3½ million to £4½ million per annum. It is a diminishing cost. Earlier this year the Government entered into a commitment to pay a cash Grant of over £4 million to the city of Birmingham to sponsor the Commonwealth Games. That sum was inflation-proofed, and it was not originally in the Government's Estimates. The money is no longer required because there has been a change of political control in the city and the Tory-controlled council has withdrawn the application to sponsor the games. I shall not enter into the argument about there being poorer facilities for the children of Birmingham as a result.
That sum of money, which is no longer required by Birmingham, would pay the cost in the first year of dealing with this anomaly. If we cannot change our economic circumstances in a year, it is a poor reflection on the Government, this House and the country. The money is there for the first year. My hon. Friend will not be alone in the Lobby tonight.

Mr. Philip Goodhart: The hon. Member for Ormskirk (Mr. Kilroy-Silk), who moved the new clause so attractively, is by no means the first

to tread this path. The reasons for pressing the clause so forcefully can be summed up by the case of Mrs. Sarah Gelder, a 92-year-old widow whose husband was killed in the First World War and who retired from her job as a church cleaner 32 years ago. In her working career Mrs. Gelder never earned enough money to pay income tax, but now, at the age of 92, she has received a tax demand for £117 on her annual pension, which, with age relief, comes to £1,010 a year.
What has happened to Mrs. Gelder is happening to tens of thousands of other war widows. As the pensions have been raised by the Government to try to keep pace with the rocketing rate of inflation, so these war widows have tripped over the tax threshold. For the first time, a war widow who has no other income and is, therefore, getting one-third or less than one-third of the average national wage is being dragged into the tax net.
That is not the only reason why this issue is now being pressed with such vehemence by such bodies as the British Legion, the Officers Pension Society, the British Limbless Ex-Service Men's Association and about 40 other ex-Service organisations. There are anomalies in this field, and international anomalies are pressing very deeply. Earlier this month we were remembering the sixtieth anniversary of the Battle of the Somme, when in one day about 50,000 British troops fell as casualties. The widow of a British corporal killed on the first day of the Battle of the Somme receives less than one-third of the war pension of the widow of a German corporal who fell in that same battle—and the German war widow's pension is tax-free. In fact, all our ex-enemies in the last war—Germany, Italy and Japan —pay tax-free pensions to their war widows, and so do the majority of those countries that were our allies in the last war.
In the past, Treasury Ministers have consistently resisted proposals of this sort by claiming that the concession would breach the principle that all income must be taxable. As my hon. Friend reminded us, however, as long ago as 1919 a Select Committee agreed that war widows' pensions should be tax-free, just as disability pensions are. In Committee upstairs, when dealing with a similar new


clause moved by the hon. Member for Ormskirk, the Minister, trying once again to draw a distinction between war disability pension, which is tax-free, and war widows' pensions, which are not, said:
The situation is that the service disability pension is a compensation, just as workmen's compensation is. The war widows' pension. of course, is an attempt to provide that person with an income."—[Official Report, Standing Committee E, 1st July 1976; c. 1740.]
It seems to me that that is a very narrow line indeed on which to try to draw a great Treasury principle.
Then there is the question of cost. In Committee the Minister of State suggested that this concession would cost about £10 million a year. Others who have examined the situation—the British Legion and the Officers Pension Society, for example—suspect that the cost would be half of that. One must remember, of course, that in a way the Government are making a profit out of war widows, because this is an area in which the commitment is declining. Last year the total social security payments went up by some £520 million over the bill for the previous year, but the payment to war widows and disability pensioners went down by £20 million. It went down because the number of war widows was declining rapidly. It is a declining financial commitment.
A number of my hon. Friends have suggested other ways of dealing with this problem. They have suggested household tax allowances. There is, of course, the tax credit scheme, which in the long run would undoubtedly provide the cure for this particular problem. But these are all long-term measures. As Lord Keynes said, in the long-term we are all dead, and, alas, war widows are apt to die even faster than we are.
What we need is not a long-term solution but an answer now. I believe that the best way of giving support to this group of people, who certainly deserve our support, is by supporting the new clause this evening.

Dr. Colin Phipps: My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk), in a deeply-felt speech, moving the new clause in his name and in the names of myself and others of my hon. Friends, spoke of this as being an

emotional issue for many people. I suppose that it is also a practical issue for most Members of Parliament. All of us conduct surgeries and all of us, I am sure, in recent weeks have had war widows coming to see us. I have a surgery on Fridays and Saturdays, and three war widows came to see me. I cannot recollect having any war widows coming to see me prior to this problem, but three came to see me on Friday and Saturday, all concerned and extremely worried about the problem of paying the tax. That is a point which has not been touched upon.
The document which all of them are receiving from the Inland Revenue shows how much they have to pay in each quarter as from October. These are sums of money starting at £25 and going up to £36, which for someone receiving the new rate represents an amount which it is almost inconceivable for her to save. This is creating quite genuine and gratuitous worry among a large number of war widows in the population. It seems to me that an aspect which we as parliamentarians really must consider is that we are quite gratuitously causing upset and distress to a large number of our electors.
It seems incredible that we can be talking about not pushing the benefit of a free car in the Finance Bill and yet we are busily clawing back £5 million, or whatever the figure is, from war widows. I should like to know from the Minister just how much we are giving away in the concession we are about to bring forward in respect of the tax which we are now, apparently, not going to charge on the benefit received from a car.
The aspect which is upsetting many of us most on this side of the House is the appalling public relations aspect as far as the Labour Party and the Labour Government are concerned. I am speaking primarily to my own Front Bench on this particular piece of legislation. We appear to be concerned to claw back £4½million from a small group of people, who none the less have sons and daughters, often grandsons and granddaughters, who are able to vote. It is felt strongly in my constituency and no doubt in others that this should not be done.
11.45 p.m.
This public relations aspect appears to stem from the only argument I have heard against giving a concession to war widows: why are we choosing war widows? Why should this not apply to the widows of coal miners and so on? I should be only too delighted—I think this applies to most of my hon. Friends—if the day came when we could extend it to all widows. But should we condone equality of suffering? Can we say that the only reason why we cannot do this is that it would improve the lot of a certain group of people, that that is wrong and that they must suffer as much as everyone else?
Let us consider war widows as a special case. I know that the Treasury abhors an anomaly in much the same way as nature abhors a vacuum. But if we do right by this particular anomaly, no one will begrudge it. Has any hon. Member received one letter expressing opposition to this concession? Is there an uproar in our constituencies about it? It is a totally popular move. It is an anomaly that no one would begrudge.

Mr. Robert Hughes: Like many other hon. Members, I have been lobbied by war widows. In many cases I have had sympathy and been prepared to support them. My hon. Friend says that there has been no outcry. I suspect that, if we pass the clause tonight, next week there will be one hell of an uproar from people who have lost their husbands in the mines or in other conditions of work. They will not see why, 25 years or even more after the event, this special concession is being made. Can we address ourselves to how we answer those questions next week?

Dr. Phipps: I shall be delighted if that happens, and I hope that my hon. Friends will be delighted. It is about time that there was more pressure from groups of that kind, pressure of which the Government took notice. We have all had pressure from widows of all kinds. But that is no reason for not doing something about one group of widows. This would be an anomaly which no one would begrudge. I hope that the Government will allow it to pass.

Mr. J. Enoch Powell: This is a new clause such as any hon. Member might take pleasure in moving or supporting. I am sure that the right hon. Member for Crosby (Mr. Page) was right to say that if we held a referendum on this matter there would be a heavy vote in favour of such a change in the law.
But this House has a responsibility not only to particular groups who suffer under such disabilities but for the integrity and fairness of our tax system generally. I believe that we should cause more injustice and resentment than we remedied if we were to make this change tonight.
The distinction which is drawn between the war disability pension as a compensation and the war widow's pension as income is not a quibble: it is a very real, indeed fundamental, distinction. The war disability pension compensates the man for the loss of a faculty, of a limb, of power of enjoyment and power of earning. But when we say that the war widow's pension is compensation for the loss of a husband, either we have said something which is equally applicable to every type of widow's pension or else we have deserted the literal use of language for what is mere metaphor.
The hon. Member for Aberdeen, North (Mr. Hughes) has already pointed to one of the crass injustices which would be brought about if we were to make this change as it stands. If the industrial disability pension is compensation, we should also tell ourselves that the widow of a person who is killed in an industrial accident is also in receipt not of income but of a form of compensation.
There is no secure ground once we depart from the principle of treating income—it is as income for maintenance that the war widow's pension is provided —as income for the purposes of taxation.
I am not unfriendly to special treatment for those who serve and for the families of those who serve. It may be that the hon. Member for Ormskirk (Mr. Kilroy-Silk) is fully justified in saying that the war widows have a raw deal. But, if that is so, there is only one proper way to put it right, and that is to put up the pension. That is the only way which does not involve anomaly or unfairness. Indeed, that is the only way which


will take the money to the place where it is needed most.
I do not think that it could be done within the scope of the Bill, but if this had been a proposal for increasing the differential as against others in favour of the widows of those who had been killed in the service of their country, I do not believe that any objection could be raised to it. But if we do what is proposed, with however good intentions and with whatever public feeling behind it, we shall be creating that which, as far as possible in a tax system, it is our business to avoid—namely injustice as between one taxpayer and another and as between one person and another in like condition.
We cannot be helped in this matter by looking at the tax behaviour of other countries in this respect. We would have to look at the whole nature of their tax systems and see how their treatment of this category fitted into them. What we know and are responsible for is our own tax system. I believe that the House would not be discharging its duty to taxpayers as a whole if it were to make this change in the law in this way.

Mr. Simon Mahon: Like many hon. Members in the House tonight, I find myself torn on what has been said to be an emotive issue.
I happen to be a war disabled person. I was one of five serving brothers. I was always most disturbed that my mother, who was an orphan at the age of 10, and my father, who was also an orphan at about the age of 10, should produce five sons, who served in some of the best British regiments, one of whom was killed and others of whom were wounded. I often wondered what kind of an anomaly it was that that hard-working woman, who produced five sons, should never have received one penny in compensation for the loss of one son at the age of 22 who was killed at Caen while serving with the Irish Guards. That is the kind of anomaly about which little seems to have been said.
But I should be doing less than my duty if, holding the positions that the Government have sometimes given me and the positions that have been bestowed upon me by other worldly organisations—for instance, as a trustee

of the Far Eastern Prisoners of War Fund, as chairman of the Apostleship of the Sea, a world-wide organisation for the welfare of seamen of all faiths, religions and colours, and as a member of an international organisation for the protection of merchant seamen and for the advancement of their welfare and culture—if I said that I was satisfied that this measure should be passed by the House with equanimity, as some people seem to think.
Who in this House is against war widows? Who does not want to make their lives a little easier? Who would not offer them succour, support and consolation for the lonely years before, during and since the war? Let no one on either side of the House think that he has a prerogative for the welfare of, or consideration or sympathy for, this noble band of ladies. That cannot be true. We are all concerned.
I am concerned about all widows, not only war widows. I ask the Government to consider this. I mention the case of a boy who might have married at the age of 22. I wanted him to get married before he was killed, but circumstances prevented that marriage. He was killed at Caen with Captain Hugh Dormer in the last tank going to Brussels. He might have lived. Another of my brothers was almost killed at Nijmegen bridge when it was crossed by the Grenadier Guards. He lived then, but he died later at the age of 36, leaving three children.
However, this is not a materialistic world. Hon Members have heard me say this before. All of us with long experience of public life know of the remarkable fact that widows' children, in spite of all their difficulties, inevitably do well. Do not let us be too pessimistic about this. There is a God. Someone looks after the destinies of people, thank God, besides materialists like us.
I ask what the Government can do for all widows in my constituency. I do not ask what they can do about the sailors in the Merchant Navy who lose their lives so consistently. I know. I have had a life-long interest in this subject. I want to know what the Government intend to do for the widows. I am not satisfied with the performance of any Government in this matter. However, I do not want to pick anyone out, because,


as the right hon. Member for Down, South (Mr. Powell) said, we should make a mistake if we pursued that road tonight.
The Government spend a great deal of money on items which are far less important than the welfare of widows and their children. It would be beneficial to the House if we obtained from the Minister a positive statement about what we may do for widows in correlation with what we may do for industrial people.
I was scaling at the Liverpool Docks when I was 14. I know of people who are dying now. I am 62. I know men who died at 35 of sarcoma caused by industrial activity, others who died of asbestosis and silicosis and miners who died of pneumoconiosis. We should challenge our consciences on this matter and ask whether in all these long years we have given sufficient consideration to the position of those who suffer when so many people do so well.
There are so many rich people in the world who do not try half as hard as the lads who sacrificed their lives or the men who man the ships out of Liverpool and Southampton and sail them all over the world, many of whom lose their lives. Let us achieve a balance. I should willingly take this separate issue if I thought I could do it with justice and equanimity, but I cannot. I ask the Government, as I would ask any other Government, to let us know their ideas and ideals about the protection of widows and their families, the children whom they have the obligation to rear.

12 midnight

Sir John Hall: As my right hon. Friend the Member for Down, South (Mr. Powell) pointed out, there is not much fiscal logic about the clause, but there is not much logic about much of our fiscal legislation. Indeed, if we all lived by logic alone life would be a very grey and dreary.
Many of us from time to time attend the gatherings of the British Legion in our constituencies. and we have heard the words of remembrance with which they start:
They shall not grow old, as we that are left grow old:
Age shall not weary them, nor the years condemn.

That is certainly true of those who were killed in war, but what about the widows who were left? Many hon. Members who fought in the last war had the difficult and sad task of going to see the widows of friends and comrades. Some of us have kept in touch with those widows. They have certainly grown old and age has wearied them. Many of them have been condemned to grinding poverty. When we compare the way in which countries against which we fought have treated their widows with the way in which we treat ours. I wonder that we have the face to argue the matter.
In a very interesting speech, the hon. Member for Bootle (Mr. Mahon) said in effect that if we cannot help all widows and unfortunate people we should help none. That is not the kind of policy and philosophy we should adopt. If we took the first step towards helping war widows, it might encourage the Government to go further and help others.
I had the sad experience of attending the funeral of a war widow who was not so very old. who had had little income all her life other than an inadequate pension. Yet she had managed to bring up a family of the kind the hon. Member for Bootle described, all of whom had grown up to be first-class citizens. But life might have been easier for her if she had had rather more generous treatment from the Government. This is not a party point. All Governments of all parties have been at fault.
We talk about remembering those who died. The last lines of the remembrance words I quoted are:
At the going down of the sun and in the morning, We will remember them.
We may remember the dead, but we do not seem to remember the living. I am staggered that Treasury Ministers can go on refusing to accept what is a very modest request which would cost very little.
I know the arguments. I have heard them so often. I know the arguments advanced by my right hon. Friend the Member for Down, South that we must not do this because it would offend against fiscal purity and be unfair to other taxpayers who might be upset. The taxpayers of the majority of countries which took part in the last war, which pay their widows bigger pensions


tax-free, do not seem upset at the unequal treatment of the war widows there. Why should we be different? The Financial Secretary should remember the words about faith, hope and charity and reply to the debate with charity in his heart.

Mr. Robert Hughes: The issue of war widows' pensions and taxation is one of deep emotion on all sides of the House, and we have heard moving arguments on both sides of the question.
None of us can claim purity in this matter. I remember voting in favour of similar new clauses when I was on the Opposition Benches and finding them resisted by the Government, supported by many hon. Members now sitting on the Opposition side. I am not making a party point. The roles are now reversed. The Opposition are willing to support the Government Back Bench new clause and I suspect that it will be resisted by the Financial Secretary, with the support of most hon. Members on this side. The sides have changed, but the issue is the same.
This is not an issue on which to adopt the approach favoured by some Back Benchers of discretion rather than valour, keeping a low profile and hoping that when one does not go through the right Lobby one is on the losing side so that nobody challenges the way one has voted.
I have given my support to war widows' associations in the past and I signed the Early-Day Motion on their pensions. However, having listened to the arguments inside and outside the House about the anomalies that would be created and the difficulties of other widows, I have changed my mind. I shall support the Government. I realise that, like other hon. Members, I shall have to explain my action to my constituents.
I was disturbed at some of the remarks made by my hon. Friend the Member for Dudley, West (Dr. Phipps). They were not made in a pernicious sense, but he referred to the public relations aspect and said that we should have regard to the fact that sons and daughters of war widows might decide how to vote in elections on the basis of our decision tonight. That is the worst possible reason for supporting the new clause. If we vote on a principle, we can stand by it. Many

hon. Members who support the new clause do so because of the principle, and they are not being dishonourable.

Dr. Phipps: Would not my hon. Friend accept that when the principle and the public relations aspects are both right we ought to be pressing for them?

Mr. Hughes: I accept that. I am merely suggesting that one of the reasons advanced for the new clause is not the best reason.
I wonder whether the case is not sometimes overdone. The hon. Member for Wycombe (Sir J. Hall) talked about widows living in grinding poverty while paying income tax. There are many widows in more grinding poverty because their earnings do not take them into the tax system.
Two wrongs do not make a right, and we have a responsibility to look at the overall priorities. This is a matter of priorities. We must ask whether we ought to breach the principle of equality in taxation and say that those who earn sufficient, from whatever sources, to take them into the tax system should receive special treatment and not have to pay tax on part of their earnings. I believe that on balance we should stick by the principle that those who earn, from whatever source, should pay their income tax on that source. One reason why I have changed my mind is that of priority. There is never a right time for concessions on taxation any more than there is a right time for concessions on earnings of one kind or another.
When we have already gone through a difficult period of public expenditure constraint—the fashionable phrase for cuts in public expenditure and reduction in services of different kinds—and when we are faced, despite the yawns from the Liberal Bench, with all sorts of constraints which will lead to anomalies for people who have not the ability to articulate their demands in the way in which some of us are able to do, this new clause is not my priority tonight.
My hon. Friend the Member for Dudley, West expressed concern that we were conceding the tax proposal in relation to company cars. I regret that, but it is not the issue we are debating now and my priorities are such that I could not in all


conscience take the easy way out and vote for the clause.

Mr. Tony Newton: I spoke on this matter at some length in Committee upstairs, and I shall not repeat here all the arguments which I then advanced.
It is important that several hon. Members have tried in the last few minutes to put a balance to this argument and to weigh up the factors on both sides. The hon. Member for Ormskirk (Mr. Kilroy-Silk) listed fairly and compellingly the arguments in favour of his new clause, and I shall not try to rehearse them, but it is important that in considering this issue we and the Government—who are virtually certain to be defeated unless they make a different response to that which they made upstairs in Committee—should take account of the powerful arguments against meeting this problem in the way proposed.
I should like to ask a few questions revolving around the fundamental question of what we are trying to do. Are we trying to help the war widows in a sensible way which gives them, and not just us, value for money? If we are, I do not think that this is the best way to do it. It would certainly—this was implicit in what the hon. Member for Aberdeen, North (Mr. Hughes) said—be helping the best-off widows most and the worst-off the least.
That is not an argument which I should find particularly compelling if we were talking about a general reduction in taxation, in the context of arguments about incentives and differentials, but those are not arguments we can apply when talking about a limited amount of money to deal with poverty among war widows. There can be no doubt that if we want to help most the war widows who are most in need, the right hon. Member for Down, South (Mr. Powell) was right in saying that any money available should be applied to increasing the pension and not to this form of tax relief. That is an argument which should not be dismissed by the House.
Are we trying to make better sense of our taxation and social security systems? If so, this proposal will not do that either. There has been a good deal of rather loose talk about logic and about not bothering too much about logic in this issue. If we

go down the path of making more and more bits of income exempt from tax, we shall never be able to make sense of the taxation and social security systems. That would run wholly counter to everything we on this side were trying to do in moving towards a tax credit scheme and counter to what I hope Labour Members will want to follow on from the child benefit scheme. Are we trying to move to a more rational approach in dealing with hardship in our society? If we are, the new clause does not really meet the case.
12.15 a.m.
Many of us keep in touch with the Disablement Income Group and other organisations concerned with the needs of the disabled. Virtually everyone who thinks and cares about the problems of the disabled thinks that it is nonsense that the income or compensation for disablement should depend on how that disablement arose—whether it was from war, industrial accident, or civil accident. The whole case for a national disability income rests on treating people as being disabled because they are disabled rather than taking account of how they got their disability.
If that argument applies to the disabled, it must in the end apply also to all widows. What matters is the fact that a woman is a widow with hardships and problems, not the circumstances in which her widowhood arose.

Mr. Victor Goodhew (St. Albans): Surely my hon. Friend will take account of the fact that, whatever one may say about logic, the war widow is usually subjected to widowhood at a much earlier age than other widows. [HON. MEMBERS: "No."] Oh, yes, indeed. I notice that those of the Left Wing do not like this. They are not too keen on it. Perhaps they do not understand. There are those who rush to serve their country and as a result die at a much earlier age than they otherwise would have done. They risk their lives, and the risks to which they are exposed are much greater than in any other sphere—

Mr. Eric S. Heffer: This is a speech, not an intervention.

An Hon. Member: Oh, shut up.

Mr. Goodhew: This is something which some Labour Members do not like


and do not wish to acknowledge, because they do not like people who serve their country.

Mr. Heffer: Do not be so silly.

Mr. Newton: I do not think I entirely accept the point made by my hon. Friend the Member for St. Albans (Mr. Goodhew). There are many young husbands who are killed in industrial accidents—in factories, on building sites and in mines—at an early age. I accept that there is certainly a sense in which war widows are in a special position. But this is taken account of in the fact that their pensions are higher than those paid to other widows. I am concerned with the taxation system. Should our tax system add to these distinctions? I am doubtful about this.
But the point that sticks in my throat, and no doubt in the throat of the hon. Member for Ormskirk, is that, although many of us doubt that this is the right way to tackle the problem, something must be done about the problem itself. The Government must address themselves to this. If someone came to earth from outer space, he would regard our situation as madness. We employ a vast army of people to collect national insurance and pay incomes to people in need, and then we employ another army of people to claw back part of what we have paid them.
We argue endlessly about the whole tax threshold problem, and we all know that this general problem cannot immediately be solved. But selective action must be taken to rescue widows and others from the tax system in which they have become trapped. We could solve the problem not by exempting the income from tax but by introducing, if necessary, special tax allowances which would have the effect of specifically raising the tax threshold for these people. It could solve the immediate problem without undermining the whole basis on which we can advance with reasonable commonsense towards the long-term improvement of our tax system.

Sir John Hall: I agree with much of what my hon. Friend said, but does he not agree that the kinds of changes he is talking about are very unlikely to be achieved this year or for several years

and that in the meantime many widows will have died?

Mr. Newton: That is exactly the point on which I was intending to conclude. I do not believe that we need wait for this. If the Government were determined to do it, the Bill could perfectly well be amended to eliminate this problem, in the case of most widows, without a significant or tremendous cost.
If the Financial Secretary is prepared to say that he will do this, I shall reconsider my position on the clause. If he is not, and if we are to wait any longer for this problem to be tackled, I shall vote for something of which I do not approve in the long term but which would help to tackle a desperate problem, rather than sit around and wait for another year or two. [Interruption.] If Labour Members below the Gangway had been present at some of the other much smaller gatherings on this Bill and earlier Finance Bills, they would know that I have been pressing this in respect not just of war widows but of widows generally for some time. It can be done it should have been done, and it should be done in this Bill. Without that undertaking, the problem being so important, I would rather accept the proposal of the hon. Member for Ormskirk as a short-term way to tackle an intolerable problem than leave it lying where it is.

Mr. Eric Ogden: The hon. Member for Braintree (Mr. Newton) in his earlier remarks forecast the result of this debate. Time will tell whether he is right or wrong. I do not know whether he is right. Certainly the voting will be across the party lines. The result will not be to the credit, as the hon. Member for St. Albans (Mr. Goodhew) suggested, of any particular section of one party, any more than it is right to say that those of any one section alone fought for their country.
This is a debate on how we can help war widows. It is not a debate about how to help all widows. Most of those who have spoken seemed to know in which Lobby they will vote this evening. I came with some doubts. As those doubts were answered by successive speakers, other questions were raised, and I still do not know in which Lobby I shall find myself later this evening. No


doubt it will be in diverse company, be it Aye or No.
First, I doubt that this method of choosing a "good cause for the day" and supporting it in this particular way is the best way to get real justice for all good causes in a given order of priority. I certainly doubt, as an ex-Merchant Navy person during the war, whether it is really right and fair that if someone volunteered to join the Merchant Navy and was then lost at sea his widow should be in a less advantageous position now than if he had waited for some time longer, been conscripted into the Armed Forces and then been killed, so that his widow would receive these advantages. If a man had been sent into the mines as a Bevin boy, his widow would be in a worse position than someone conscripted into the Forces or someone volunteered for the Forces and then lost his life.
The argument was summed up to a degree by the hon. Member for Braintree when he said that we are continually concentrating on the result and not on the causes. Pensions, allowances, help and support depend on the cause of the disability and the cause of widowhood, and not the effects of the disability or the results of widowhood. It is said in the coal mining industry that if a man feels ill he should get down below to die and not die on the pit top. If he did that, his widow would be better off. If the pit blows up and there is a national disaster fund, the widows will be much better off. This is an exaggerated way of looking at the business, but the allowances and support we give depend too much on the cause and not the result.
The argument remains that if we cannot help everyone we should help some. That is a persuasive argument. It is not valid to argue that this will cost only £3½ million. Every one of the 630 Members of this place has a favourite good cause which could use £3½ million. Six hundred and thirty multiplied by £3½ million equals nigh on £2,000 million. This is at a time when the Government are desperately trying to cut their expenditure by £1,000 million. This debate has shown example after example of anomalies and difficulties. The Minister has to spell out what has been done and assure us that he has proposals to secure

real help for all widows in an effective, speedy manner.

Mr. George Reid (Clackmannan and East Stirlinashire): The hon. Member for Ormskirk (Mr. Kilroy-Silk) spoke with deep knowledge of the cruel dilemma with which he is faced on this issue, and hon. Members on both sides of the House share his difficulty.
If I had been told a few years ago that a widow whose sole income was a war pension would be subject to tax, I would have found the suggestion ludicrous. If it had been suggested that a person with an income of £17·50—less than one-third of the national minimum wage—received a tax demand, I would have found it incredible. If the Treasury Bench had said that the increase of the pension in November to £19·80 would leave a paltry 22p after tax, I would have found the suggestion risible. But that is the reality.
In recent months I have discussed the real distress that this causes to war widows in Scotland, as elsewhere. They are extremely hurt and frightened. Some are the widows of men who died in Flanders in the First World War, and they are hurt and distressed that they are being pursued by the taxman. It is the supreme example of ever-increasing tax burdens hitting low income groups which everyone agrees are a special case.
The Treasury argues that this is the direct result of pension increases and the effect of inflation on the tax threshold. That is a good technical argument, but try to tell it to 40,000 war widows in Britain whose husbands made a unique and irrevocable sacrifice. Try to explain to them that the widow of a German soldier is twice as well off, and that the same German widow if permanently resident in the United Kingdom would get tax-free benefits. Try to avoid comment on the fact that the United Kingdom, alone of the great Powers of the Second World War—Russia, Germany, United States and Japan—taxes war widows.
I am in a moral dilemma, torn between intellectual belief that the course suggested by the hon. Member for Ormskirk is not the best way to tackle the problem and a straight commitment to the women who have waited for so long.


Tonight the House will be judged by the way in which it treats the dependants of the men who sacrificed everything. It is time to recognise that the war widows of this country. They are the only form of of gratitude.
How are we to achieve that? In the United Kingdom we operate two social security systems, one rooted in fiscal measures and the other rooted in social security benefits. With some allowances taxable and some not, we have an anomalous mess. We should develop a system in which all income is taxable and which avoids the means test, and we should rationalise benefits according to individual circumstances. That was the logic behind the Child Benefit Scheme, and that was why I wanted a wider system of tax credits, getting away from means-tested benefits and avoiding the degradation of the poverty trap. I recognise that for practical reasons such measures are not for now.
I ask myself whether war widows are different in kind from other widows. Are they different from miners' widows, for example? Are they in a different position from widowers? I believe that a case can be made for war widows on four simple grounds. The first ground is emotional but it is none the worse for that. I believe that nothing compares with the circumstances of these women's loss. The long lines of cemeteries in France, Italy, North Africa and the Far East bear mute testimony to their loss. No amount of compassion will ever recompense them for the telegram from the War Ministry, for the loss of companionship, the loss of the chance to build a home and family, the loss of opportunity for happiness and security. In those circumstances it is wrong to be giving a war widow a pension with one hand and taking it away with the other in taxation. That is quite wrong.
12.30 a.m.
The second argument concerns the unique situation of war widows' pensions in this country. They are the only form of benefit to be taxed. Various Members have mentioned the peculiar anomaly of disablement pensions paid to soldiers injured in war situations. I think that they were right to do so. If a man loses a leg in war, he receives benefit tax-free. If he loses his life, his widow is taxed on her pension. That seems quite wrong.

It is an anomaly that dates back to 1919, but it is not sacrosanct because of that. The tax technicians may he able to find reasons for justifying it, but in common sense the British people recognise that it is wrong.
I am sure the Treasury Bench will argue that the disability pension is compensation for injuries suffered in performance of duty, but a war widow's pension is surely compensation for the loss of companionship, for the loss of a husband. Surely that should be recognised through due tax exemption.
The third argument is simply one of international comparison. I shall not dwell on the argument for long as others have drawn attention to the comparisons. We know that among the Old Commonwealth and the allies in the Second World War we are unique in taxing the pensions of war widows. Is it surprising that our war widows should feel hurt, especially in view of what I find to be the distasteful anomaly of the German widow who lives in this country full-time and enjoys her pension tax-free, and when Government after Government have awarded a non-contributory retirement pension to Australian war widows who live here, who are already in receipt of a tax-free war pension in excess of £26 a week from their own Government.
My last arguments deals with comparative insurance cover. If a woman is widowed as a result of an accident to her husband while at work, there is a fair chance that there is an insurance scheme. In any event the employer can always be sued, as can any person responsible for death in a road accident, for example. That widow can claim that her husband's death was due to criminal injury, but there is no such avenue for the war widow. Once her husband is killed in action, that is that.
I appreciate that the Government have done a great deal for war widows in two years. They have increased the benefit payable to them from a paltry £10·10 to almost £19·80 in November this year. But we must remember that inflation has been biting into the purse of the war widow. I find it appalling that the increase in November will be only 22p a week. That is not enough for a special group of women.
I would rather see the matter resolved through tax credits, but I recognise that


that is not a practical course of conduct at this stage. Therefore, I support the new clause. In the course of Finance Bills Government after Government have bypassed clauses of this sort, but opinion in the country now expects results. I believe that by accepting the clause the House would show a small act of practical gratitude to the women who have waited so long.

Mr. W. R. Rees-Davies: I shall be brief, but as a member of the British Limbless Ex-Service Men's Association I think it right to put the record straight.
The association and its members find it hard to draw a distinction between its own members and the widows. I must deny what the right hon. Member for Down, South (Mr. Powell) and my hon. Friend the Member for Braintree (Mr. Newton) have said. My hon. Friend does not seem to recognize—there is no reason for him to do so—the feelings of the widows and the men who served in the war. They have deep feelings, but it is not for me to say whether they are right or wrong.
I must tell the House that I am a 90 per cent. disabled person. It is nonsense to suggest that payment is made by way of compensation. There is nothing especially disabling about myself that has ever resulted in my experiencing any difficulty in earning a living in my capacity. There is a yardstick by which 60 per cent. or 70 per cent. is paid for the loss of a limb. It is a yardstick laid down by the Government which produces a certain income and has nothing to do with earning capacity.
Widows say to me "We see no reason why you should be in a position to get your pension tax-free when we cannot". The argument of the right hon. Member for Down, South is spurious and I ask the House not to accept it. It is not true, and it is not the way that we see the case.
It is difficult to see the difference between the case of the war widow and that of others. I concede that there is a sense of pride among those who suffered in the war. When I go abroad I can travel on the trains across Europe with priority. I can cross the borders and go to the top of the queue because I am

war disabled. So can the widows, and it applies all over Europe.
It is too late now to go into the fallacious argument put forward by my hon. Friend the Member for Braintree, who tried to say that we should treat paraplegics on the same basis as war widows. It is too late for that. Let us give a special privilege to these few. It is a privilege. I am not suggesting that it is not, but it is one that should be allowed not only to the men but to the women.

Mr. Richard Wainwright: Earlier in the debate, the hon. Member for Birmingham, Perry Barr (Mr. Rooker) carried the House with him when he said that the severe plight of widows occurred only recently when the tax threshold descended to its appallingly low level. Until it became so disgracefully low, the issue was not desperately alive. The logical and full-scale remedy would be to jack up the tax threshold. In all parts of the House, however, we know that on the Report stage of the Finance Bill we have to aim for modest reforms. At this stage it is hopeless to argue for a scheme of improvements that would be fair to everyone. To talk of improving the gross amount of the pension is disgracefully irrelevant.
We must also bear in mind that we are dealing with a class of people which is diminishing in numbers each year. We are not dealing with an anomaly which will remain for ever. We are dealing with people whose needs are urgent, and we cannot talk in terms of improving their lot next year or at some future date. After all, some of them are widows from the First World War. It is sheer hypocrisy to talk as if we were possessed of a tax system of such purity, consistency and all-round fairness that we should not risk the slightest blot. Faced with that position and the opportunity to do a bit of good, there is no doubt that we should support the hon. Member for Ormskirk (Mr. Kilroy-Silk) in his efforts.

Mr. Nicholas Winterton: We have had some moving contributions tonight. I refer particularly to the contributions of the hon. Member for Bootle (Mr. Mahon), my hon. Friend the Member for Wycombe (Sir J. Hall) and, recently, my hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies). My hon. and learned Friend


put this whole matter into proper perspective. The hon. Member for Colne Valley (Mr. Wainwright) has highlighted the reason for this debate, namely, the fact that the tax threshold is now far too low. This debate is taking place because, for the first time ever, many war widows come within the tax system which they have never before done.
Perhaps I should declare an interest in that I am president of the Congleton branch of the Royal British Legion. That is a position which I value, a position which I am proud and honoured to hold. The people we are talking about are unique. While I accept the logic of the argument of my hon. Friend the Member for Braintree (Mr. Newton), I believe that he is wrong to advance it in the case of war widows. My right hon. Friend the Member for Down, South (Mr. Powell) states that if we accept the clause we shall be creating an anomaly in our tax system. All I can say is that I shall relish this particular anomaly, because we should be doing justice by a most deserving sector of the community.
Less than 10 days ago, at my last constituency interviews, held in the borough of Congleton where I live, an elderly lady in her late 70s came to see me. She brought with her various tax forms which she had received from the Inland Revenue. This lady was the widow of a soldier who had fought in the battle of the Somme in the First World War. He had been severely gassed while fighting in France. While he lived for many years after the Great War, he suffered ill health for the remainder of his life. For the last 12 years of his life he was bedridden and had to be nursed by his wife. For about the last 12 months of his life he was in hospital and was visited each day by his wife.
The lady came to see me because she had received a tax demand. She had never received one before. She was concerned and upset. This is an atrocious situation. If the Government are unwilling to accept the clause, they should increase the tax threshold to enable that lady, who has worked hard all her life and nursed her husband for the last 12 years of his life, to escape this income tax trap.
This is a moving debate. It is one which will have repercussions outside the House. I plead with the Government.
They have to respond to the feelings not only of hon. Members on both sides of the House but of many hundreds of thousands of people outside. I intend to support the hon. Member for Ormskirk (Mr. Kilroy-Silk). It will be the first occasion on which I have ever done so. I do so because I believe that the category of perns involved is deserving of support and because I believe that this House wishes to see justice done.

Mr. Cow: When the Financial Secretary replied in Committee to the same new clause, which had been moved by the hon. Member for Ormskirk (Mr. Kilroy-Silk), he concluded his speech resisting the clause with these words:
although I have the greatest sympathy for its purpose and objects, I do not believe that this is the way to carry out the intention which he, and every one of us, has at heart."—[Official Report, Standing Committee E, 1st July 1975; c. 1748.]
If the Government were coming to the House tonight telling us of some way in which they could meet the objectives of the hon. Member, we might be inclined to vote against the clause. We are faced with a stark choice. Either we vote for the clause—which the hon. Member for Ormskirk admitted was not perfect—or we do nothing. We are faced with this situation: we have a chance to do something to put right an injustice that is widely felt by hon. Members on both sides of the House. The method before us is not perfect, but it is the best and the only course open to us, because the Government have not put forward an alternative.
12.45 a.m.
I find myself in disagreement with the right hon. Member for Down, South (Mr. Powell), who said that we ought not to make a distinction between this category of widow and other categories of widow. I believe that we should. I believe that we should follow the precedent set by successive Governments throughout the whole of our estate duty legislation and capital transfer tax legislation, and notably in the Finance Act of last year. Total exemption was given from estate duty, and there is now total exemption from capital transfer tax in respect of estates of those who are killed on active service or killed in Northern Ireland. If it is right to provide that tax exemption for the estates of the comparatively


well-off—for, remember, estate duty and capital transfer tax do not begin to bite until one has an estate of £15,000—how much more is it right to give a benefit to the widows whose capital is well below the figure of £15,000?
In making the journey from Jerusalem to Jericho we may not be able to assist all those who have fallen on hard times, but we have the chance tonight to help one category and we ought to take that chance.

Mrs. Audrey Wise: Since I do not want to seem to be being led into the Lobby by certain hon. Members on the Opposition Benches. I wish to make the position of myself and some of my hon. Friends quite clear. I am pleased that my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) put down his new clause, and I shall support it because I believe that the ordinary working-class people are by far the greatest victims of the wars that have afflicted our kind of society.
It seems quite reasonable and logical for us to say that, since society has inflicted premature widowhood on these women and has blighted their lives, we should remit 50 per cent. of the income tax on their pensions. I contend that that is little enough, and to those of my hon. Friends who say "What about the miners' widows, and what about the widows of those killed in industry?" I say that it does not do the widow of someone killed in industry a jot of good to keep the war widows in penury. If there were an amendment to help those who had been widowed because of industrial injury, I should vote for it as well. Since there is not, and since my hon. Friends have had the initiative to table the clause, I shall support it.
We all know that there are some who have made considerable sums of money out of wars, and those who at present make money out of arms production. I am in favour of helping those who have been the victims of wars. Therefore, I shall support my hon. Friend in the Lobby.

Mr. Robert Boscawen: I sense that the House wants soon to come to a decision, so I shall be brief. Like some other hon. Members, I have been

worried about this debate. I would have found it very much easier to have made the speech that my right hon. Friend the Member for Crosby (Mr. Page) made. War widows are a special case and there is a great deal of emotion about them. I am still worried, however, because "war widows" is a term which refers to the widows of Service men of the Armed Forces only, whereas during the First and Second World Wars many people in uniform of all kinds died with great gallantry in order that this nation should survive. The Merchant Navy has been spoken of, as well as the police, the fire service and many people whose widows are not entitled to a war widow's pension and who certainly would not get tax relief on it if the new clause were passed.
Those of us who served in the Armed Forces—I for one, whose wife would be a war widow should something happen to me very soon—do not have the conceit to think that we gave better service than did many of our fellow citizens. I remember the notice which remained throughout the war on Nelson's Column which said that National Service was the duty of every citizen. So it was, and all the people during those war years acted accordingly.
I would find it difficult to support the clause but for the fact that I am totally appalled that the taxation level should be so low as to strike at an individual widow's pension. The reason for this debate is that the taxation level has not been raised whereas, of course, pensions have had to be increased to keep them in line with prices. For this reason, and because we are at least trying to help a small number of people, I shall support the amendment. I believe, however, that the essence of this evening, and the most important message to be got home to the Government, is that the threshold of taxation on all widows is far too low. Something has to be done about it, otherwise all of us will be marching and voting in the Lobbies to try to ensure that those people are not taxed in the way that the present Government are taxing them.

Mr. Paul Hawkins: As so often happens on these occasions, this has been a magnificent debate from both sides of the House.


I do not intend to spoil it by standing on my feet for too long. I would like to mention the speech of the hon. Member for Bootle (Mr. Mahon), who always speaks straight from his heart and from his own experience. However, I do not come to the same conclusion as he did.
I would only like to say that in Norfolk, from all the Royal British Legion branches and from the headquarters of the Far East prisoners of war association, with which I am connected, I know of innumerable cases of widows who have come to me and to fellow Members of Parliament and councillors and who have felt that this latest blow of the tax hitting them has really been the final straw. We have to throw logic out of the window on this occasion. I appeal to the hon. Member for Bootle to say that this will be the thin end of the wedge which will permit other widows to reach the same position as we hope to secure for war widows.
Looking at me—seemingly fit and well except for my girth—people would not imagine that I am a war disability pensioner. Meeting war widows, I often feel ashamed to reflect that I do not pay tax on my pension while they pay tax on theirs. For that reason, which may not be logical, I shall certainly support the new clause.

Mr. Nott: This has been a moving debate in which the House has been at its best. It would be invidious of me to single out any speaker, but I am sure that, whatever our views, we are grateful to the hon. Member for Ormskirk (Mr. Kilroy-Silk) for tabling the new clause. Not only did we appreciate the speeches of my right hon. Friend the Member for Crosby (Mr. Page) and my hon. Friend the Member for Beckenham (Mr. Goodhart): we admire them for their persistent advocacy of the case of war widows over many years.
The House wants to move to a conclusion, so I have no intention of deploying all the arguments again. The emotional argument was well put by the hon. Member for Ormskirk and, in a moving speech, by the hon. Member for Bootle (Mr. Mahon).
The distinction which we have made recently between the war disability pension and the war widow's pension has been supported by many Ministers over

the years, but the ground is not very secure. It is shifting all the time. As my hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies) said, it is becoming more and more difficult to support. The speech of my hon. Friend the Member for Norfolk, South-West (Mr. Hawkins) showed the other side of the case very clearly.
When a man who has been receiving a war disability pension tax-free dies and his widow finds that she pays tax on her war widow's pension, it must be difficult for her to make the distinction, even if its logic has often been advocated in this House. There is great strength of public feeling on this matter, and it must sometimes be right for the House to respond to those feelings.
Without wishing to provoke any controversy, I do not think that there is any longer much logic in our fiscal legislation. When the right hon. Member for Down, South (Mr. Powell) was a Treasury Minister, there was probably securer ground and more logic in our fiscal legislation than when I became a Treasury Minister, but, two years on, the ground is now even less secure and certainly the logic is becoming more difficult for all of us to see.
So we come down finally to the new circumstances that the House faces. As many hon. Members have said, the tax thresholds have fallen so dramatically that these people, on one-third of the national average wage, are paying tax on their income. Ministers have been able to say in the past that, although the pension of the war widow was theoretically taxable, she did not pay tax if she had no other income, but it is no longer possible to say that. The war widow with no other income now pays tax for the first time.
There is also a practical point which I do not think has been made so far tonight—that at the moment tax is not being collected from war widows. It is payable, but because of the embarrassment of the whole situation the tax is not being collected. It has been possible to say "In fact, this is de minimis and the Revenue has discretion not to collect minimal amounts of tax". But the war widow's pension is going up. As my hon. Friends have said, it is going up to £19·80. Therefore, £130 tax will be payable—over £2 a week—and it will no


longer be possible to say that it is de minimis. No one wants a situation in which tax payable by war widows is not being collected, but that is the practical situation that we now face.
1.0 a.m.
Although many of my lion. Friends might say that they prefer to see the tax thresholds raised, the war widow's pension raised, and even a householder's allowance for a widow and other alternatives to what is proposed in the clause, the fact is that the proposals before us are the cheapest, easiest and most direct way of helping the war widow in this new situation where she is liable to pay a substantial amount of tax when she has no other earnings.
We come back to the question posed by many hon. Members, particularly the hon. Member for Liverpool, West Derby (Mr. Ogden), should we help some if we cannot help all? That is the dilemma with which the House is faced tonight. I think that the answer should be "Yes".
War widows are a very special case. Speaking for myself—not for my party, because this is not a party matter—I hope that the House of Commons will tonight reverse the traditional position of all Governments by supporting the hon. Member for Ormskirk in the Lobby.

Mr. Robert Sheldon: We have heard a number of very moving contributions tonight. I do not want to pick out any particular speech, but I do not think that the House would forgive me if I omitted reference to the contribution made by my hon. Friend the Member for Bootle (Mr. Mahon).
This matter arouses considerable emotions. My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) made no apology for that fact, and I understand that too. Having listened to the debate throughout. I am sure most hon. Members will accept that the emotional aspect is not only justifiable but helps us to understand some of the real problems that we witness in our surgeries and in our day-to-day contacts with people involved in these matters.
I should like to establish two facts at the outset concerning the numbers involved. The right hon. Member for Crosby (Mr. Page) asked me about this

matter. In fact, there are 90,276 war widows. This information comes from a count at the end of last year.

Sir John Hall: Does that figure include war widows in Northern Ireland?

Mr. Sheldon: It includes all war widows, including officers' widows and those living abroad. That may account for the discrepancy that the right hon. Member for Crosby has noticed and mentioned on a number of occasions.
I should like to mention the matter of the 22p a week which my hon. Friend the Member for Ormskirk said would be the only increase that the war widow would be obtaining this year. I would like to correct him on that matter. On the assumption that a war widow with no income, apart from her pension, paid no tax in 1975–76 because of the concession that my hon. Friend mentioned—I see that he takes the point—she will be better off in 1967–77 by average weekly amounts varying from 51p to £2·55. In November the basic war widow's pension increases by £2·60 a week from £17·20 to £19·80. After a tax at 35 per cent., the increase will be worth £1·69 a week net.
Having disposed of those matters, I should like to deal with the more general and fundamental points that have been made by a number of hon. Members. The problem—this was acknowledged by the hon. Member for St. Ives (Mr. Nott) among others—has been that of revalorising benefits when we do not revalorise tax allowances. This means that each year, according to the commitments that we undertook and in which we now willingly engage, we increase the benefits, including war widows' pensions. They have increased more than the cost of living. This has been the great success of this Government. But the level of inflation has meant that the threshold has not risen. We have seen the threshold going down while the benefits have gone up. We have been faced with that problem.
However, we must accept the successful part of this operation. War widows' pensions have been increased by 70 per cent. from 10·10 when we came to office to £17·20 now, with a further £2·60 to take effect in November. By comparison with when we came to office, war widows' pensions have almost doubled. The real benefit received by war widows is immeasurably greater than anything else


that we have seen in recent years. My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) asked me to restore the position of war widows' pensions. We have done more than that. We have increased substantially in real terms the true level of war widows' benefits. We should be proud of that fact and acknowledge it.
We are faced with the choice of increasing the benefits or the tax allowances. For a certain sum of money we may increase the benefits payable to war widows by raising their pensions, or for the same sum we may increase the tax allowance. We must decide what is the best way in which to help those whom we wish to help. We must take fully into account the fact that people with the highest incomes do the best out of tax allowances. That is what it is all about. The tax allowances help most those who earn, or have, the most.
Benefits and pensions may be directed to help most those who have the least. That is the purpose of the benefits. The tax system pre-dated the social security system by a long time. When the tax system was being refined in its earlier years, tax allowances were introduced to take account of the changes. The allowances have remained with us. But with the advent of the social security system and the ability of Ministers and Departments to spend the large sums of money that are available, we now have a much more refined instrument with which to direct money into the pockets and purses of those concerned. The Department of Health and Social Security is far more able to pinpoint that assistance than we are in view of the crude ways that are available to us by way of increasing the tax allowances.
The 50 per cent. mentioned in the clause means that those who pay tax on only a small part of their pension will receive little or, in some cases, no benefit, since in some cases of war widows' pensions the tolerance limits will mean even now that no tax will be collected. The advantage of these tax allowances would have little or no effect on the number of people involved.

Mr. Rees-Davies: Does not the Minister recognise that the war widow is interested in her just rights, not in receiving charity by way of supplementary

benefits? That is what this debate is about.

Mr. Sheldon: I am surprised that the hon. and learned Gentleman talks about the pension as charity. We have long passed that stage. The war widows have a right to the pensions. There is no question of charity.
We need to take into account the extra payment which the war widows are entitled to receive. For many years the excess of a war widow's pension over the ordinary national insurance widow's pension has been about 30 per cent. Successive Governments have taken the view that this was justified by the extra problems and the fact that the widows were in that position because of actions by the State. In view of the emotional case and the strong arguments adduced, the House may well come to the conclusion that a 30 per cent. lead is not enough. The matter can then be considered in the normal way.
The difficulty is that year after year we have Finance Bill debates but we do not have benefit debates. Therefore, there is a predisposition to try to help by means of allowances. If we had benefit debates each year, the argument could be advanced that those concerned would do much better through our increasing the benefits. Not only should we have a better debate, but perhaps money would be directed more readily to the areas of need described.

Mr. Graham Page: Is the hon. Gentle. man telling the House that he will increase the benefits?

Mr. Sheldon: These are matters for much wider consideration. Does the right hon. Gentleman believe that such decisions can be announced in a debate such as this? The arguments are best advanced in the context of increasing the pension. I only deplore that our procedure does not allow them to be put forward in the kind of debate best suited to them.

Mr. Heffer: Like many other hon. Members I am torn on the subject, although I did not support the clause. What will happen to these old ladies? One of them aged 73 came to see me. She had never paid any tax before but was now talking about committing suicide. It was very distressing. She was crying on


my shoulder. An ordinary working woman, she faces a £61 payment in October. She does not have £61. What will be done to overcome the problem of such people? If there can be an easement of their problems, I shall consider voting for the Government.

Mr. Sheldon: The figure my hon. Friend gave suggests that the lady in question has some other income. We rarely know the whole income of a constituent unless we go into the matter more fully. I shall be happy to take up the case. On the basis of the facts given to me, it seems that the lady is paying too much tax, and it is right that I should be able to offer assistance in making sure that that does not continue.
1.15 a.m.
The clause would cost up to £10 million. In dealing with matters of public expenditure and the public sector borrowing requirement, we must take the maximum likely figure. A figure of 50 per cent. might prove very difficult to administer. If we made it 100 per cent., it would cost up to £20 million.
What concerns me most about this debate is the task put upon me as a Treasury Minister in being asked to decide matters of social security. If we are not careful, we could have a whole systems of social security being built up through the multiplication of various tax allowances. That is not the right way to proceed. The proper way is through the social security system with those who have the knowledge, ability, talents and skills in the Department and who understand these matters far better than I can. For instance, I do not understand these matters in the same depth as my hon. Friend the Minister who is responsible for the disabled. These matters should be dealt with through the expertise in the Department of Health and Social Security.
We spent more time on these matters in Committee then we are able to devote to them tonight, and doubts were expressed by the hon. Members for Braintree (Mr. Newton) and for Norfolk South (Mr. MacGregor) and even by the hon. Member for St. Ives. They said that they did not like the new clause. The hon. Member for St. Ives produced arguments that were consistent with the

view he had expressed previously. He showed his embarrassment—not surprisingly—when he continued in an astonishing way:
My hon. Friends and I have discussed the matter, and my right hon. Friend the Leader of the Opposition feels particularly strongly on this subject.
This is a subject on which doubts were expressed by the right hon. Lady's hon. Friends.
She feels that something must be done, and that we should not in this case be over-influenced by the precedent which surrounds these matters. We must recognise that conditions have dramatically changed."—[Official Report, Standing Committee E, 1st July 1976; c. 1735.]
The Leader of the Opposition did not listen to the arguments. Her principle is to oppose the Government whenever it is profitable to do so. I suggest that that is not a principle that should commend itself to this side of the House.

Question put, That the clause be read a Second time:—

The House divided: Ayes 190, Noes 170.

[For Division List No. 243 see col. 619] Question accordingly agreed to.

Clause read a Second time, and added to the Bill.

New Clause 14

RELIEF FROM TAX FOR DAMAGE CAUSED BY CUSTOMS AND EXCISE OFFICERS

'Any expenditure incurred by a taxable person as defined in the Finance Act 1972 in repairing any damage to his property or replacing his property following an inspection by representatives of the Customs and Excise shall be deducted as input tax for the next period'.—[Sir G. Howe.]

Brought up, and read the First time.

1.30 a.m.

Sir Geoffrey Howe: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Oscar Murton): With the new clause we are to take the following:
Amendment (a) to the new clause, at end, add
'and for the purposes of this section an inspection by representatives of the Inland Revenue under Schedule 6 to this Act shall be deemed to be an inspection by representatives of the Customs and Excise'.


Amendment No. 82, in Schedule 6, page 127, line 10, at end insert—
'(3) All items taken by the said officer of the Board shall be copied and returned within 7 days.
(4) The said officer of the Board shall be responsible for ensuring that the premises entered by force are left in a safe and secure condition against further entry or theft.
(5) The said officer of the Board shall be fully liable to make good any loss or damage whatsoever to the premises or their contents as a direct result of his activities'.

Sir G. Howe: The House will want to spend a great deal of time on this issue, but it is one which is important and right to bring to the attention of the House, even at this hour of night. It contains proposals dealing with the mounting alarm, expressed outside the House as well as inside it, at the way in which enforcement officers and inspectors are exercising their powers in relation to value added tax.
If hon. Members will look at the form of the clause, they will see that it is confined to one very small matter, namely, that any expenditure incurred by a taxpayer as a result of his property being damaged by an inspection by VAT inspectors should be deductible against his tax liability. It is a limited point but the only one we could get in order in terms of the Bill. It foreshadows a much wider subject to which the House will want to return when we consider Schedule 6 and the very wide powers being given by the Government to the enforcement officers and the snoopers for income tax purposes, quite beyond value added tax.
On this point I invite the House to conclude that it is the plainest possible justice that any taxpayer whose premises or property is damaged by inspectors of that kind ought certainly to be entitled to compensation from the State by setting it against his tax liability.
The purpose of bringing the matter before the House at this stage of our proceedings is to demonstrate and underline the fact that the House is well aware of the growing concern at the way in which VAT enforcement officers are exercising their powers. Hon. Members will certainly have seen the case reported in the newspapers only a week or two ago of the retired Romanian engineer, a taxpayer in his 80s, whose house was inspected by VAT inspectors during the

small hours of the morning and who was himself gravely distressed and alarmed by the entire procedure, to the extent that he is said to have been driven to suicide as a result. Plainly one cannot pronounce upon all the facts of that particular case, but it is only one of a number of examples now being reported in the Press, and in correspondence to Members of this House, showing that there is mounting anxiety at the way in which these powers are being exercised.
Nobody doubts that the existence of inspection and enforcement powers of this broad nature is necessary in connection with value added tax, and nobody is seeking to go back from that, but the fact that the powers are necessary is no reason for concluding that they should not be closely scrutinised and closely controlled. We suggest that they should be more closely scrutinised and more closely controlled than they have been recently.
The House will have seen that many organisations were protesting yesterday, including the National Federation of Self-employed, which have been compiling a dossier of misuse and abuse of powers of entry and search by Customs and Excise officers. The Association of Self-Employed Persons and the National Association of Self-Employed Action Groups have expressed themselves as increasingly concerned.
The House discussed the general question when it was considering the powers that the Government proposed to give to Inland Revenue officers under Schedule 6. I said:
We made plain in 1972 that we would be ready to review the form of operation of the VAT powers if there were any sign of abuse of them. The time for review has come. Certainly, the VAT powers should be reexamined. Many people feel that they should be withdrawn altogether. I do not go that far, but I have no doubt they do need to be closely examined and accompanied by stronger safeguards."—[Official Report, 17th May 1976; Vol. 911, c. 984.]
The proposal contained in the clause is the only safeguard which we can get in order in the context of the Bill. It is a minimum and certainly desirable safeguard, and I invite the House to vote in favour of it.
I renew without qualification the pledge I gave on 17th May to see that the exercise of these powers is scrutinised


and to see what safeguards need to be written into the law in the light of the past four years.

Mr. Robert Sheldon: The right hon. and learned Member for Surrey, East (Sir G. Howe) said quite openly that the new clause was only a peg on which to hang his anxiety about certain aspects of the way in which the VAT powers were being exercised. Those powers arose from the 1972 Act for which responsibility was claimed, and triumphantly acclaimed at that time, by several right hon. Gentlemen sitting on the Opposition Benches. The powers were a direct consequence of the introduction of VAT, and what has happened has been a result of that.
The right hon. and learned Gentleman is right to bring certain cases to my attention, but it is wrong to comment on matters which are at present subject to invesigation. I call for cases to be brought to my attention where I have doubt as to the nature of the operation or where the Press has drawn a matter to my notice. I have had reports on a number of cases, but it would be wrong for me to comment on them.
It is right for me to say something about my responsibility for the VAT operation in so far as it affects the powers of search of private accommodation. These are the most sensitive powers of the VAT processes, and it is right that they should be exercised with great care and a fair amount of close ministerial responsibility. My information is that in 139 out of 143 searches of private accommodation, a VAT criminal offence was found to have been committed. That is not sufficient, because we need to know the scale of the offence.
All that I have been able to do since I became Financial Secretary with responsibility for these matters is, on a sample basis, to send for reports on a number of cases in which there were certain disquieting features or features which I thought needed further investigation. I have been happy to do that, because these are matters which need close, persistent and continual scrutiny, which I am sure I or my successors will wish to maintain.

Mr. Peter Rees: As the Customs and Excise and the Inland Revenue are armed

with powers quite as extensive as those of the police, does not the Minister think that there might be a case for a complaints tribunal, so that complaints against the Inland Revenue could be investigated by an impartial tribunal independent of the Minister concerned?

Mr. Sheldon: I never close my mind completely to any changes. I was one who felt that the 1972 Act, on which so many members of the Conservative Government prided themselves, was far from perfect. I said so at the time and I say so now. However, my task is not to complain about the instrument that I inherited but to try to make it work with the least disadvantage to the citizenry of this country.

Sir Geoffrey Howe: If the Minister is concerned with trying to make it work to the least disadvantage to the citizen, I hope he will address himself to the precise proposal contained in the new clause. I see no possible case against giving the taxpayer indemnity against damage to his property along the lines contained in the clause. I hope that the Minister will accept the clause. Surely it meets his own objectives.

Mr. Sheldon: I am happy to deal with that point. Perhaps I took the right hon. and learned Gentleman too literally when he said that he wanted to raise other matters. It is a pity that when he was Solicitor-General, with responsibility for these matters, he did not see fit to introduce such a proposal in legislation. However, I understand his point.
Under Section 35(5) of the Finance Act 1972 there is responsibility upon the Customs and Excise to undertake to return documents in the form in which they were received. Subsection (5) states:
Where any documents removed under the powers conferred by this section are lost or damaged the Commissioners shall be liable to compensate their owner".
Samples are covered by Section 36(3), which states:
Where a sample is taken under this section from the goods in any person's possession and is not returned to him within a reasonable time and in good condition, the Commissioners shall pay him by way of compensation".
Those aspects are covered, but there is the problem of compensation in respect


of other forms of property. In any case where the Customs and Excise has committed damage and has found subsequently no offence to have been committed, the present practice is that it is prepared to consider making compensation. That is the existing practice. I think that should be welcomed by the House.

Sir Geoffrey Howe: Why will the hon. Gentleman not accept the wisdom of embodying the practice as set out in the clause? He says that he is anxious to make the system work as the House would like to see it work. As he cannot point to any objection to the proposal contained in the clause, why cannot he accept what we suggest?

Mr. Sheldon: In general in these matters, far from submitting such cases to the precision of legislation—

Mr. Lawson: Oh.

Mr. Sheldon: The hon. Member for Blaby (Mr. Lawson) says "Oh", but lie was not here when we went through the Bill in 1972 and pointed out so many of the disadvantages that it has been my lot to try to remedy to the best of my ability. However, this is not one of those cases where a claim for compensation could arise for the cost of repairs. If a lock is broken, for example, in normal cases the position is clear. The VAT officials will enter premises, and if they are denied access to a strong box, for example, they will undertake to force the box. There may be some damage consequent upon that. That is the sort of situation that we are concerned about, and in such a situation the Customs and Excise has been prepared to make compensation available. That is the way in which such matters have been handled, and I hope that that is the way in which we shall proceed.

Mr. F. A. Burden: If the clause were written into the Bill, would it not make Customs and Excise officials more careful about breaking into boxes and safes? Would it not mean that they would exercise more care and greater responsibility?

1.45 a.m.

Mr. Sheldon: I would not say that that follows. It may be that extra

obstruction would be caused to the officials.
The case which has been made is inadequate. I feel strongly about the kind of campaign that has been exercised by certain sections of the Press. If we wait until these matters come before the courts, we shall see them in a rather more balanced light than that portrayed in some of the hysterical outbursts that we have heard.

Mr. Geoffrey Finsberg: The Minister is being much less courteous than usual and is reading from a poor brief. He indicated that in cases where damage has been caused the person found innocent might receive compensation. Speaking as someone who used to sit on the Bench, I thought that it was the duty of the Bench to levy a fine. It was not the duty of the person who had been fined to suffer extra cost because of the forceful methods adopted by the police or Customs and Excise officials. The Minister will not have the sympathy of the House if he gives his answers in that way.
The hon. Gentleman mentioned 139 cases. Is he in a position to tell us now, or at a later date, how many cases of damage have occurred to people's property? Surely he should have obtained the figures by now.

Mr. Sheldon: The only help that I can give the House is to explain the figures. Since VAT came into being there have been 143 searches of private accommodation. In 139 of those cases a criminal offence was found to have been committed.

Mr. David Mitchell: Amendment No. 82 has been selected for discussion with the new clause. It is an important amendment concerning the powers of tax inspectors, and I am not sure why it has been chosen for discussion with the clause. It concerns safeguards for a person whose house has been broken into by a tax inspector and it makes three provisions. First, the inspector should copy the information that he obtains and return it after seven days, secondly, that he should secure the property so that no one else can subsequently get in, and thirdly, that he should make good any damage.
There need not be a long debate on this issue because I imagine that the Government will accept the amendment, which is simple and which has common sense and justice on its side. It highlights the danger of the Government giving such powers to tax inspectors.
The Government require certain information and allow tax inspectors to indulge in house-breaking activities to get that information. When that information—contained in books and so on—is obtained, it should be returned to the householder after photo-copies have been taken. It is moderate to suggest that it should be returned within seven days. The situation is difficult. We are concerned with the person whose premises are broken into by tax inspectors who have no great training in the art of housebreaking. I do not know what training is to be given.
Perhaps the Minister can tell us how housebreaking by Inland Revenue inspectors is to be undertaken. Do they bring a jemmy to force the lock? If so, what happens if, not being very accomplished at this work, they break part of the door rather than force the lock? If they do that, they will not be able to close the premises properly when they leave. Or will the inspectors break a window? If so, there will be nothing to stop a burglar from coming along afterwards and gaining access to the premises. These are the practical implications of giving these powers to inspectors of taxes.
One of my hon. Friends pointed out to me earlier this evening that during the war it was usual for people who had to undertake special duties to be trained by those resident during His Majesty's pleasure at a certain place on Dartmoor. I am not suggesting that tax inspectors require such training, but I am suggesting that the Government should provide safeguards that will ensure that premises which have been broken into are properly locked up afterwards and that they should accept liability for any damage caused to the citizen as a result of their activities.

Mr. John Loveridge: I support my hon. Friend the Member for Basingstoke (Mr. Mitchell). His amendment speaks first of the need to copy and

return any documents that have been seized. Most of us will have seen advertisements in the Press by fire protection agencies saying that a large percentage of firms that have their documents burned go bankrupt and never operate again. That proves the importance of having these documents returned.
Secondly, the amendment seeks to ensure that the premises are protected against further entry. They should not be left open to burglars. Thirdly, we ask that any damage done should ge made good. This amendment is even more important in the light of the Chancellor's Amendment No. 83, which provides only that a list shall be given, if asked for by the frightened people whose premises are entered and whose documents are seized. The amendment allows people reasonable access to their own papers only if they can demonstrate that the papers are required for the continued conduct of their business. How can they demonstrate such a thing? What considerations are to be required?
In answering a Question on 10th May the Financial Secretary gave an account of how seven Customs inspectors and two policemen had entered a bungalow but had discovered no evidence of any crime. Are we to find that the same will be true of the activities of the Revenue officials? The powers exist and can be used, not only agaist the persons in question but against their spouses and their children. Documents can b.; seized from children. There is no definition of the age of the sons and daughters. Will the inspectors be given training in seizing documents from children? The reference in the Schedule is to any records whatsoever. That leaves the matter wide open in the inspector's hands, to do what he likes.
The section that is to be replaced is Section 20 of the Taxes Management Act 1970, the provisions of which were first introduced in a war-time measure, introduced in 1942. But even the 1970 Act gives greater powers than exist under Section 20, in its own Section 51, which allows the inspection of all books and other documents, and allows copies to be taken. There was a small penalty for damage, but not penalty enough. This new measure requires much greater protection for those whose premises are


searched, and I therefore hope that the Government will accept the clause.

Mr. Burden: I listened very carefully both to my right hon. and learned Friend and to the Minister. I was as surprised at the Minister's speech as I was at the previous speech he made, which resulted in the defeat of the Government. But what was most surprising was that the Minister stated that although, if samples were taken they would be returned in good condition or there would be compensation, and that the whole would hold good for documents, if there were damage to property the Inland Revenue or Customs authorities would consider, and only consider, compensation for that which had been destroyed or damaged.
It was also made clear that even if that damage had been done to the property of an individual subsequently found to be completely innocent of any crime the Inland Revenue or Customs authorities would only consider compensation. Surely, if people are found to be completely guiltless and there has been damage to their property there can be no question about restoring that damage or paying compensation; compensation must be mandatory.

Sir Geoffrey Howe: No doubt we shall have a later opportunity to vote on the amendment about which my hon. Friend the Member for Basingstoke (Mr. Mitchell) spoke. The Minister gave no good reason for not accepting the new clause. There is no point in prolonging the debate. If the Minister now wishes to indicate that he will accept the clause we need not vote, but if he does not, I invite my hon. Friends to join me in the Lobby in support of the clause.

Mr. David Mitchell: The Minister has not yet indicated his acceptance of Amendment No. 82—[Interruption.] He might have the courtesy to tell the House that he is not going to accept it.

Question put, That the clause be read a Second time:—

The House proceeded to a Division—

Mr. Lawson: (seated and covered): On a point of order, Mr. Deputy Speaker. I understand that Amendment (a) has been grouped with this new clause. Is it in order to have a vote on the clause before

having a vote on the amendment that has been selected with it?

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): Whichever way round we look at it, the Second Reading would come first. As I understand it, Amendment (a) has not been selected for a Division.

The House having divided: Ayes 146, Noes 165.

[For Division List No. 244 see col. 621] Question accordingly negatived.

New Clause 16

AMENDMENT OF SECTION 69(3) OF FINANCE (NO. 2) ACC 1975

'Subsection (3) of section 69 of the Finance (No. 2) Act 1975 (Deductions on account of tax, &c., from payments to certain sub-contractors in construction industry) shall be amended by the omission of subsections 3(b), 3(c), 3(d) and 3(e)'.—[Mr. Ridley.]

Brought up, and read the First time.

Mr. Ridley: I beg to move, That the clause be read a Second time.
The clause deals, once again, with one vexed aspect of the new arrangements brought in in 1975 for sub-contractors in the construction industry. It is not a major point, but it is a point which has been made on several occasions before and with which the Government have so far failed to deal either by accepting the need for amendment or by satisfactory argument.
Indeed, I have a letter from the National Federation of Building Trades Employers which urged this matter on the Chancellor, to which the reply was:
you may be sure that he will bear your representations in mind.
Bearing representations in mind is not what we want. What we want is a reasonable defence from the Financial Secretary, if he is to reply, or, alternatively, an amendment.
The point is that local authorities, housing associations and new towns—I shall not read out the whole list of public bodies—are classed as main contractors. In deducting tax from those who do sub-contract work and who do not carry a certificate, they have to make deductions direct from any sub-contractor they employ.
I understand that the construction of the original section in the Finance (No. 2) Act 1975 is that in order for there to be a contract there has to be a main contractor and a sub-contractor, and that it is from that relationship that the power to require a main contractor to deduct tax from those without certificates derives. I understand that argument.
But all those who commission building work are not so required to behave. For instance, a private firm, a factory or a private individual who commissions building work and can enter into a contract direct with a lump labour firm is not required to be bound by last year's Act. Equally, many people who do not need to be included are included. Those are cases in which a local authority or housing association enters into a contract with a reputable main contractor and the main contractor is required, under the legislation, to produce his certificate and to go through all the paper work, although it may be the Greater London Council employing Wimpeys. That kind of contract is far removed from the lump labour contract at which the original legislation was aimed.
This matter is causing annoyance and irritation, and a great deal of extra paper work and frustration in the building industry. It is an added and unnecessary bit of bureaucracy, because there is a large amount of paper work attaching to having to send to the tax collectors certificates stating that tax has been deducted, or that it is not necessary to deduct it. An extra burden of paper work is put upon the industry, with no reason at all.
I suggest that the Government could clear this matter up straight away by accepting the clause. Alternatively, they could clear it up by providing that a local authority has to go through this rigmarole only when it employs lump labour as opposed to a main contractor. Alternatively, they could clear up the matter by providing that where a main contractor works directly for a local authority it is not to be classified as a main contractor for the purpose of the legislation.
There are three simple, watertight, reputable ways in which this may be done. I appeal to the Government to choose the way that I have included in the clause, as it is the simplest. If they

wish to find their own way of achieving that object, let them do so. I hope, late though the hour is, that the Minister will advance some arguments on the matter. On no previous occasion when I have been present has the Minister done more than say "We know best. This is what the Revenue think that we must do; therefore we shall do it, whatever the Opposition may think."
I urge the Minister to accept the principle I suggest or explain why he should not do so.

2.15 a.m.

Mr. Robert Sheldon: The new clause, if passed, would introduce a major change into last year's legislation. I do not think that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who moved the clause, seeks to avoid that responsibility. However, if the clause were passed a great weakening of the scheme would result. We must bear in mind the problems that we have encountered over the past few years in trying to obtain the correct tax and insurance contributions from businesses of this kind. Those who have lived with these problems have realised that they were much more difficult than originally envisaged. In spite of the changes, the tightening-up and the close consultations that have been a feature of this legislation, such businesses have evaded their responsibility.
The hon. Gentleman sought to deal with those bodies which he considered to be of good repute. We have also considered how far it might be possible to make exceptions for large firms about whose standing there can be no dispute. The problem is that local authorities and large firms often act as main contractors. They sub-contract part of their work to other bodies, which may be reasonably reputable but about which there may have been some doubt in the past as to the way in which they carried on their activities. I do not think that I need go far, beyond mentioning the name Murphy, which was a large, reputable organisation but which was recently the subject of a number of charges.
Main contractors, be they local authorities or firms of good reputation, as suggested by the hon. Gentleman, may well in the natural course of their business wish to engage sub-contractors of the kind that


we seek to include in our legislation. It would be wrong to undertake any weakening of this process before we see it in operation.

Mr. Ridley: I suggest that the Government circularise local authorities and say that where they employ sub-contractors they must abide by the rules. The Government may take the rest of the requirement out of the Act. That would meet the case. I am trying to meet the legitimate need to tighten up but at the same time to cut out a lot of bureaucracy. I have suggested a fourth way, but the Minister merely says that those in the industry think that it is better to do it in this way. I should declare an interest, as I have a connection with a builder. All the building people engaged in the industry find that there is a great deal of bureaucracy and nonsense. The Minister's answer so far has not met the point.

Mr. Sheldon: The hon. Gentleman did not wait until I came to what he might have considered the more constructive part of what I had to say. I accept the problems caused by the legislation, but the hon. Gentleman must understand, as the industry does, the great problems arising from the incredible amount of evasion that has bedeviled Governments in dealing with the situation. When local authorities engage sub-contractors they may not know their precise circumstances, and so on. The hon. Gentleman assumes a relationship between the main contractors and the sub-contractors which is not inevitably the case.
The hon. Gentleman has made an important point, of which we are very conscious, but this is not the way to deal with it, certainly at this stage. However, I see the problem of the amount of paper work, and a special procedure has been arranged whereby a number of the kind of organisations to which the hon. Gentleman referred will be able to provide local authorities with evidence of their certification by a written statement instead of having to rely on their certificate, as the other businesses of which we were talking will have to do. This arrangement will represent a considerable relaxation of the scheme, particularly for main contractors, without abandoning the deduction arrangements altogether.
That is as far as we can go in advance of the introduction of a new scheme, which in any case we shall have to consider with great and continuing care.

Sir Geoffrey Howe: The Financial Secretary acknowledges that there is genuine concern about the cases of the large contractors of which he talked, and we agree. The development of a scheme for the reliable collection of tax in this sector has caused difficulties to successive Governments, but there is now concern that the bureaucratic requirements have gone further than necessary in the area mentioned by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley).
We are glad that the Financial Secretary went as far as he did in acknowledging that there may be scope for modification and relaxation and withdrawal of frontiers, but concern continues to be expressed by the smaller subcontractors and firms. The hon. Gentleman will probably have received today, as I have, a long report from the National Federation of Self-employed on the whole scheme. I am not suggesting that he would be able to buy all the propositions in the report on sight. The federation expresses concern about the impact of bureaucracy on the small firm as well as the larger firm, and sets out a number of proposals which deserve consideration. The federation believe that the cost of administration, including the production of exemption certificates, will be disproportionate to the amount of lost revenue it is hoped to recover.
I am not denying the difficulties, but I hope that the Government will continue to see how the bureaucracy and the burdensome nature of the scheme can be diminished.

Mr. Ridley: I am grateful to the Financial Secretary for having gone some way, and to my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) for having tried to push him a little further. I hope that he will succeed.
This is a real problem, but in view of the forthcoming nature of the end of the hon. Gentleman's remarks, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 29

AMENDMENT OF SECTION 488 OF INCOME AND CORPORATION TAXES ACT 1970

"Section 488 of the Income and Corporation Taxes Act 1970 shall be amended in respect of any gain realised after 1st August 1976 by inserting in subsection 14 after '1969' the words 'and where the person chargeable under this section realises the gain after 1st August 1976, the amount (if any) of any development land tax payable in respect of the disposal of the land shall be deducted in determining the tax chargeable on that gain under this section but if the amount of the development land tax payable exceeds the tax chargeable under this section the excess shall not be repaid'."—[Mr. Ian Stewart.]

Bought up, and read the First time.

Mr. Ian Stewart: I beg to move, That the clause be read a Second time.
The purpose of the clause is to resolve one of the loose ends from our discussion of the Development Land Tax Bill. We have run this race before, although over a different course, and I shall not repeat the arguments in detail.
Section 488 of the Income and Corporation Taxes Act 1970 is an anti-avoidance measure designed to catch what the Inland Revenue might regard as a trading transaction even though it was presented in the form of a capital transaction. Section 488(1) says:
This section is enacted to prevent the avoidance of tax by persons concerned with land or the development of land.
It can relate to land or property direct or to an indirect interest such as shares in a land-owning company.
The problem that concerns us relates to a direct interest in land. We have development land tax of 80 per cent. with a useful, but only temporary concession of a 66⅔ per cent. rate up to £150,000. The rate is due to rise eventually to 100 per cent. and the danger of the Inland Revenue of taxpayers getting away with a 30 per cent. rate of capital gains tax seems to have largely disappeared.
A specific allowance should be made to provide against the possible double charge of development land tax. Otherwise, a personal tax rate of 83 per cent. combined with a development land tax rate of 80 per cent. or 100 per cent. could produce a horrendous rate of 163 per cent. or even

183 per cent. This may be regarded as unlikely to happen in practice, but it is clearly a possibility.
I recognise the difficulty of including a precise provision of the sort we should like in the Development Land Bill. The appropriate Schedule could not be easily amended in the appropriate way.
In Committee, the Minister recognised the problem, but declined to accept an amendment on the ground that Section 488(6) provided that the method of computing the gain should be just and reasonable in the circumstances. He said:
There is no problem… I should have thought the taxpayer has plenty of protection in the provisions of subsection (6) of Section 488."—[Official Report, Standing Committee J, 13th May 1976; c. 1224.]
After we had both had a weekend to consider the matter further, it was raised in the "clause stand part" debate, and the Minister said:
I am bound to say that there is a slight problem here. The argument I adduced in Committee was that, because of the 'just and reasonable' apportionment in Section 488, the DLT paid would be taken into account in computing Section 488 tax. Indeed, that would override the provision in the clause that generally there shall be no deduction from other taxes in respect of DLT. Section 488 talks specifically about computing on the basis of what is just and reasonable. I recognise that there is some difficulty here. It will probably work out all right in practice, but it is not entirely clear from the words of the two sections that this result would strictly be achieved."—[Official Report, Standing Committee J, 18th May 1976; c. 1282.]
Section 488(6) says—
For the purposes of this section such method of computing a gain shall be adopted as is just and reasonable in the circumstances, taking into account the value of what is obtained for disposing of the land, and allowing only such expenses as are attributable to the land disposed of, and in applying this subsection—…
(b) account may be taken of the adjustments to be made in computing such profits or gains under subsections (2), (3) and (4) of section 142 of this Act (allowance for tax on premiums on leases).
2.30 a.m.
Here are two specific instructions about the computation of tax under Section 488(6), the first allowing only such expenses as are attributable to the land disposed of. That is clearly not a reference to tax on disposal, as development land tax legislation and other tax legislation makes clear.
There is a reference to one type of tax which may be taken into account, but that is tax on income. That is here specified, so the presumption is that other taxes should not be taken into account in such computation. I wonder whether, if with reference to Section 488, there was a charge to development land tax and it went to appeal, the taxpayer would have a watertight defence in every case against a Section 488 assessment.
This could easily be remedied at no cost to the Exchequer and I call on the Minister to put the matter beyond doubt. It would cost the Revenue nothing, and would remove the dangers, remote though they are

Mr. Denzil Davies: When I saw that this new clause had been selected I was delighted, because our debates late at night would never be complete without some reference to development land tax. I can give the hon. Member for Hitchin (Mr. Stewart) the assurance I thought I had given him in a letter to try to clear up the difficulties that arose in Committee. Those were created by my bad use of the words "deduction of tax".
The hon. Member was right in pointing out that under development land tax provisions other taxes are not allowed to be deducted and that double taxation relief is given not in the way it is in part I of Schedule 6. There is no deduction. Relief is given not by deducting the actual tax but by taking the amount of the tax computed out of the liability. I shall repeat what I said in my letter. The aim is to achieve—and this will be achieved—what part I of Schedule 6 secures in all other situations. It will be achieved because of the "just and reasonable" words in Section 488(6) of the Income and Corporation Taxes Act 1970.
It would not be just and reasonable to impose double taxation, and a computation under Section 488 will exclude development land tax liability. There will be no double charge. The charge under Section 488 will be merely a charge under that section, and development land tax will not be charged on the same transaction because it would not be just and reasonable to charge two taxes on one transaction. So there is no possibility of the Inland Revenue raising the kind of assessment which the hon. Member fears.

If that assessment were raised, the Commissioners, there would be little doubt, would hold that it was not just and reasonable to charge two lots of tax.
I see the hon. and learned Member for Dover and Deal (Mr. Rees) moving in his seat, but not quite rising, but I assure him that that is the position, and again I give him the assurance that there will be no double taxation, because of the "just and reasonable" provision of Section 488(6).

Mr. Peter Rees: The Minister is quite right; I did move uneasily in my seat, because the assurances of a Minister carry no weight in courts of law. They are called upon to construe the legislation that we hand down, however imperfectly, from this House. They are not entitled to take any account of what is said here. It may be that on a side wind, a skilful advocate can sometimes bring in the course of our debates, but what is said here has no significance in a court of law.
Perhaps the Minister of State will allow me to uncover my worries to him. He says—and one recognises his aptitude in this—that there is provision in Section 488 that the measure of liability is to be computed on a basis that is just and reasonable, but he will recognise that that provision long ante-dated development land tax and capital gains tax, so it could well be that a court, called upon to consider a position in which there was a possible interaction and overlap between the two taxes, would come to the conclusion that the draftsman of Section 488 could not possibly have had in mind the development land tax, because it had not even been conceived; neither had its predecessor, the development gains tax. It would be quite reasonable for the court to come to the conclusion that the draftsman could not possibly have had the fact in his mind that there would he an overlap of taxes.
Beyond that, I remind the Minister that it is very unusual—I cannot call to mind any case in recent years—for there to be in such a roundabout way the provision for deduction of one tax in the computation of another. I cannot think of any recent situation in which a tax imposed by Parliament has been counted as a deductible expense in a computation of liability.
However well intentioned the Minister may be—and I recognise that he has the glimmerings of sympathy for the taxpayer—it is his duty to rationalise our irrational tax system. His words, however well thought out and carefully constructed, will not give must comfort to anyone outside this House who has knowledge of these matters.
The Minister of State could admit that there is a genuine worry here and tell us that he is prepared to accept the amendment devised by my hon. Friend. That would be a far better way of approaching the problem. The Minister of State may find technical defects in the amendment —that is a habit of Government. If so, we must rest content with his assurances for the next 12 months, and hope that he will assure us that in next year's Finance Bill a properly constructed clause will be introduced to put beyond doubt this fear that we feel.

Mr. Graham Page: We must press this matter a little further. The Opposition's Gemini of the Development Land Tax Bill, although it has moved up a couple of Benches, still has the tenacity it had during discussions on that Bill. The Minister of State will remember that when this matter was first discussed he expressed the view that the "just and reasonable" provision gave a remedy here. But on the second occasion, he had his doubts.
It may be that the court will have doubts also. I have no doubt that Section 488 does not specifically deal with this problem, or solve it. It does not deal with development land tax, and if one assumes that this tax came in 16 years after Section 488 was drafted, one still cannot read it into that section and get the remedy that we require by this new clause.
The Minister relies on the fact that it would not be just and reasonable to charge double taxation, but if the section gives no other relief, it means that the unfortunate taxpayer having suffered a wrong assessment—a double assessment—must go to court and prove that it is just and reasonable that he should have it amended.
No harm whatever can be done to the Exchequer by including the new clause. We are not asking for relief from taxation; we are merely asking for the

matter to be put beyond doubt. It is in doubt now. It was shown to be in doubt during the Committee stage, when the Minister changed his mind over the weekend. At one moment he said that it was quite all right. After the weekend he said:
I recognise that there is some difficulty here. It will probably work out all right in practice, but it is not entirely clear from the words of the two sections that the result would strictly be achieved. I accept that that is not an entirely satisfactory situation, and I shall certainly look at that point again."—[Official Report, Standing Committee J, 18th May 1976, c. 1282.]
The Minister has looked at it again. He has changed his mind again. He now thinks that it is satisfactory. If the Minister's mind is changed so frequently over this, this matter may come before a court and we shall not know how it will be decided. There is no harm in putting it beyond doubt now by the inclusion of the new clause.

Sir Geoffrey Howe: Far be it from me to add more than a word or two to the utterances of the promoted, translated, Gemini or genii, but it strikes someone who might almost be described in this context as an outside observer—a man on a kind of Clapham Front Bench—that doubt has passed through the Minister's mind about the adequacy of the provisions of the Bill. It certainly seems to be well founded. We cannot very easily rely on legislation 16 years old to preempt the niceties to which my right hon. Friend referred. If the expressed words contained in the new clause meet the point and place it beyond doubt, or at least go some way towards doing so, would it not be wiser for the Minister to consider accepting something on those lines, rather than leaving it in this state of nebulosity, which is uncharacteristic of his own good nature?

Mr. Denzil Davies: I expressed doubts in Committee and considered the matter again. I discussed it with the Inland Revenue, and I am satisfied that it is the Revenue's view that assessments would not be raised in a case of this kind. The Revenue takes the view that it would not be just and reasonable to impose double taxation on the same transaction. I do not say that my remarks here could influence the courts, but the Revenue is the assessing authority, and


as far as I am aware, no one can be brought to the courts for tax liability without an assessment from the Revenue.
The Revenue takes the view that it is not just and reasonable to impose double taxation in a case of this kind, therefore no assessment would be raised. The whole object is to get the kind of interaction relief that is contained in Part I of Schedule 6, and the relief will operate in exactly the same way.
I have been asked why the new clause cannot be accepted. Perhaps I can explain the difficulty. Section 488, as will be realised, does not apply just to disposals of direct interest in land. We are not concerned only with direct interest in land. Section 488 is also concerned with the disposal of shares. The clause, therefore, does not meet the point, because it is directed at the general Section 488 situation and not at the particular situation of a disposal of a direct interest in land.
With the best will in the world, I could not accept the new clause, for that very reason. I am satisfied about it, having discussed the matter with the Revenue, but I shall certainly keep the matter under very close review, and if problems arise I shall ensure that they are put right at the earliest possible opportunity.

Mr. Peter Rees: The very example which has been given demonstrates the kind of difficulty in which the taxpayer may find himself. He is assessed by reference to a sale of shares in a company which holds, or once held, land. It may well be that somewhere down the chain there will be a disposal of land which will give rise to development land tax. The individual will then save tax on the sale of the shares and be met by the objection "There is no question of double tax, because we are charging only on the sale of shares. Someone else to whom you gave the opportunity of making a profit will be subject to tax." There is no conection between the two. The very example that the Minister gives demonstrates the difficulty that can only be solved by a clause of this kind.

2.45 a.m.

Mr. Davies: The hon. and learned Gentleman did not follow our debates very closely on the Development Land Tax Bill Committee, as he was not a

member of the Committee, but he will recognise, as the hon. Member for Hitchin (Mr. Stewart) recognised, that we are not concerned with that problem. It is not intended that relief should be given in that situation. We are concerned with the disposal of a direct interest in land when for some reason there would otherwise be a charge both to development land tax and income tax or corporation tax under Section 488. We are not concerned with shares disposed of today and land being disposed of by the company in two years' time. We are concerned merely with the direct disposal of land. In that case I am satisfied that there would not be a double taxation liability.
I recognise the misgivings that have been expressed. We shall keep the matter under close review, and if there appears to be a problem, or if indecision is created, we shall put it right at the earliest possible moment.

Mr. Graham Page: I presume that the Minister will be sending out a circular, pamphlet, leaflet or directions in explanation of the terms of the Finance Bill. Will he include in that document a statement similar to the one he made to the House? It is true that he said that the Inland Revenue would not assess in these cases, but that statement does not get out to the public, whereas a circular does.

Mr. Davies: I shall be happy to do that in whatever may be the best way of doing it. I shall be pleased to issue a circular or a Press release to clear up the point.

Mr. Ian Stewart: I am grateful to the Minister for his explanation. I omitted to refer to his letter, not through lack of courtesy but because it did not seem to say anything different from what he had already intimated to me.
I welcome the Minister's categoric statement that in his view and that of the Inland Revenue an offset will be available for any development land tax paid on a direct charge which might also be potentially caught by Section 488.
It is a completely new interaction of tax, as my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) said. Therefore, it is necessary to give it publicity and make certain that the position is widely understood outside the


House. That can be achieved by an explicit statement on the lines of the Minister's statement tonight, included in an explanation from the Inland Revenue, as my right hon. Friend the Member for Crosby (Mr. Page) suggested. With the assurance that this will be done, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 35

CAPITAL TRANSFER TAX: UNQUOTED COMPANIES

'There shall be a relief in the value transferred of 30 per cent. subject to the assets consisting of shares in an unquoted company where the transferor together with five or less other persons has control of the business.'—[Mr. David Mitchell.]

Brought up, and read the First time.

Mr. David Mitchell: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Oscar Murton): With this we may take the following amendments:
No. 113, in Schedule 10, page 138, line 40, leave out first 'transferor)' and insert 'transferors'.
No. 114, in line 40, leave out second 'transferor' and insert '4 or less transferors'.
No. 115, in line 40, leave out from second 'transferor' to 'and' in line 3 and insert:
'a major shareholding in the company immediately before the transfer, and a major shareholding means for the purpose of this Act not less than 20 per cent. of the shares in, or securities of, the company'.

Mr. Mitchell: I should, first, declare an interest. The clause has been put down with a view to helping the Government because they may feel able to accept it. The Government have already recognised the strength of the case embodied in the clause, because they have given the 30 per cent. rebate on valuation for capital transfer tax in the case of an unquoted company where the shareholding concerned is 51 per cent. or more.
We realise that the Government have ben afraid of their left wing and its known desire to destroy family businesses. Possibly they have not yet felt able to extend the concession announced in the

Budget to companies where the shareholding is less than 51 per cent. Indeed, the new clause suggests that that should be the position
where the transferor together with five or less other persons has control of the business.
In that circumstance, as I shall illustrate. the case is as compelling as in the case that the Government have accepted, where 51 per cent. or more applies.
Although we realise that the Minister is normally restrained from being able to accept an amendment that gives small businesses such as family businesses, some protection from the inroads of capital transfer tax, at this hour of the night he could slip through such an amendment without his hon. Friends below the Gangway noticing what he is doing. Indeed, there is now only one Labour Member below the Gangway, and his recumbent position suggests that he would not be aware of the Minister's acceptance.
The position is quite simple. The Government have given an offset of 30 per cent. in the case of a shareholding of over 51 per cent. Basically, the 30 per cent. discount, if that expression may be used, takes account of the degree of inflation that has occurred since capital transfer tax was first introduced. There is no offset for the 20 per cent. to 51 per cent. shareholding in a company, but it is just as difficult for companies where there is that sort of shareholding to pass from one generation to the next.
The House must have in mind that any business that has been built up from near scratch during the lifetime of the proprietor will have a substantial liability to capital gains tax even before it starts to pay capital transfer tax. There will be few funds outside the average family business with which to pay the transfer tax. Where the wealth of a family is tied up in a business that it has spent many years building up, which will be passed on, or should be, to the next generation to make larger, perhaps to a size where it may be floated on the Stock Exchange, there will be no funds with which to pay the tax other than in the business.
I do not know whether the Government have considered the possibility of allowing the business as such to pay tax in that circumstance. That would ease the real central problem—namely, that


the next generation to inherit the business and run it will be able to pay the capital transfer tax liability only by taking money out of the business in terms of gross salary and accumulating sufficient post income tax net salary to pay the capital transfer tax. Anyone who does his sums will realise that it is not conceivably possible in any business larger than about £100,000 to take out enough money to meet the transfer tax liability, even over eight years and interest-free. In a business worth £250,000 one would have to take out in salary over eight years more than the total value of the business to have a net sum with which to pay capital transfer tax. The Government must recognise that something should be done.
The amendment gives the Government the opportunity to extend it right across the board in the case of significant holdings in unquoted small businesses. I urge the Government to accept the clause. Not a single member of the Tribune Group is in the Chamber, and the Minister could quietly accept the clause and do much good for smaller businesses.

Mr. Ridley: I support my hon. Friend the Member for Basingstoke (Mr. Mitchell). We are in an extraordinary position. We are rapidly going back to the old estate duty. Every time the Government look at the ugly capital transfer tax, they create a few more estate duty-type provisions.
I welcome the major concession for private businesses, but already the Government have created two types of taxpayer—the taxpayer who has a 51 per cent. holding in a private company and the tax payer who has 49 per cent. holding. They are treated as totally different people, like hon. Members of the House, who are divided between those who either allege or declare themselves to have, or have not, found themselves outside incomes. One group receives one level of remuneration and the other a different level.
My hon. Friend the Member for Basingstoke is right to spotlight the similar situation in the taxation treatment of shareholders. It would be more sensible and equitable to say that it should apply to all shareholders. The tax is unworkable, impossible and useless.
The amelioration in the clause helps, because the problems always arise in raising cash to pay the tax. Whether one has a small or large share one has to sell it, or part of it, to find the money to pay the tax, especially when it stands at the penal levels of capital transfer tax. That means that the control of that block of shares passes to the person who buys the shares. By that means the ownership pattern is broken up. That is made worse if a person who has a 51 per cent. holding receives relief while the minority shareholders do not.
In most private companies the 51 per cent. shareholder will be in a position to object to a new purchaser. He can say that he will not agree to the transfer of minority shares to Mr. X because he does not like him. He can destroy the value of the shares. That is the danger. In happy companies with happy relationships it is probably easier for the minority shareholder to ask the majority shareholder to lend him a few shares so that he can qualify for the 51 per cent. holding before he dies, with an agreement that they will be passed on after he dies.
3.0 a.m.
This presupposes a mutual trust and respect among shareholders that is not always to be found in the private sector of the economy. In commending my hon. Friend's clause I congratulate the Government on their slow and painful progress towards realising that all the things they did in the absurd capital transfer tax have to be unwound. The Government can do this in the absence of the Left wing and we will not say too much to embarrass them.

Mr. Peter Viggers: I support the new clause. Investment in a small, unquoted, close company is indeed like walking a tightrope. One is throwing oneself very much on the sympathy and co-operation of one's colleagues. I speak as one who has to declare an interest as an investor in a close company. When a profit has been made in a close company there is corporation tax of 52 per cent. to pay and then income tax on the benefit of the amount that goes through to the individual.
At the moment there is a tax over-kill on close companies. This causes distortion and means that owners of such


companies are forced to consider whether they might be better employed in forming a partnership, or some kind of overseas partnership, or whether it is necessary for them to un-close the company, which can be done in certain circumstances. All of these are distorting factors which should not be present. Close companies ought to be able to operate without the principals having to devote so much of their valuable management time to trying to work through a maze of tax regulations. It is clear that the modest concession now proposed will be beneficial to small companies and thus, indirectly, to the country.

Mr. Denzil Davies: The speeches from the Conservative Benches have been moderate. I am told that there are no members of the Tribune Group present and therefore I may take certain action. Despite this, I am afraid that, even at this late hour, I cannot accept the new clause or the amendments. The clause seeks to extend the 30 per cent. relief now given to majority shareholdings—a shareholding in excess of 50 per cent.—of an unquoted company to minority holdings—presumably 49 per cent. or 20 per cent. The argument is that if we can give this relief to the majority shareholding we can do so for the minority holding.
The hon. Member for Cirencester and Tewkesbury (Mr. Ridley), with his usual perspicacity in these matters, put it clearly when he said that we are moving back to the old estate duty, when we gave a 45 per cent. relief, in certain cases, to a majority shareholding in respect of estate duty. Perhaps I ought to remind the hon. Gentleman that the Bolton Committee, which examined small businesses, considered extending the 45 per cent. relief to minority holdings and came down fairly strongly against such a move.
The clause seeks to extend the 30 per cent. relief to minority holdings. The Bolton Committee looked at this in the context of estate duty and came to a conclusion similar to that we have reached in confining this relief to majority holdings.
There were a number of debates in Committee about this matter. My right hon. Friend the Chief Secretary made the

point, which I have to make again, that there is a difference between a majority holding and a minority holding, and not just in the number of shares held. The hon. Member for Cirencester and Tewkesbury said that the 51 per cent. holder would be able to object to the new purchaser. That is one factor to be taken into account.
There are other factors. The person with more than 50 per cent. can stop all sorts of things being done, or can do all sorts of things that the holder of 49 per cent. cannot. The 2 per cent. difference is often worth more than the percentage difference of 2 per cent. of the company's assets.
It will be recognised that there is a substantial difference between a majority holding and a minority holding. We seek to relieve the majority holder in respect of the additional value, because he has a valuation additional to the normal valuation of the shares.
Once one goes below 50 per cent. there is no point at which one can say one should stop. One could go down to 5 per cent. My experience of the valuation of shares leads me to believe that minority holdings are not worth all that much. The view was expressed at one time—perhaps the Estate Duty Office would not agree—that a minority holding was not worth much more than par value. It is a respectable view, because as one reaches the lower percentages one finds that the minority shareholder cannot exercise any control, and is left in a precarious position.
We have made a major concession in giving the 30 per cent. relief and we have thought it right to keep the concession to holdings of 51 per cent. or more bearing in mind that the Bolton Committee also came to the conclusion that estate duty relief should not be extended to a minority holding.

Mr. David Mitchell: Would the Minister consider the possibility that under certain circumstances the company could pay the tax? I realise that that introduces a new concept, but it gets over the substantial problem that it will not be possible for an individual to accumulate sufficient money to pay capital transfer tax liability out of his post-income tax income.

Mr. Davies: The possibility of a company paying the tax was raised in connection with estate duty, and in one instance such a concession was operated by the Estate Duty Office. The hon. Member is asking for this to be applied generally. The question has been con-considered in the past but it has been decided for various reasons that it is not possible. There are difficulties about extracting funds from companies, and there may be opportunities to extract funds which we would not want to allow.
I take the hon. Member's point; there may be difficulties about paying the tax —although it can be spread over eight years—that might be alleviated by allowing the company to pay the tax. But we think it right to give relief to the majority holders, recognising the additional value that a majority holding confers upon the holder. We cannot extend the concession to the minority holder.

Mr. Viggers: Is the Minister saying that a person called upon to assess the value of a minority holding in an unquoted company will follow the Minister's line, which is that smaller minority holdings in companies have a value almost as low as par?

Mr. Davies: Certainly not as low as par. That was a view I have heard expressed. It is recognised by the Estate Duty Office that the value becomes less and less as the minority holding decreases, and that there is a difference in value between 51 per cent. and something less than 50 per cent. That has always been recognised. That is one argument. My right hon. Friend the Chief Secretary put forward the same argument in Committee for basing relief on a majority holding, because once below 50 per cent. there is a considerable decrease in terms of valuing the shares.

Sir Geoffrey Howe: I must add my voice to those of my hon. Friends in pressing this proposition upon the Minister of State. The general case of principle put forward by my hon. Friend the Member for Basingstoke (Mr. Mitchell)—a principle that seems to be inescapable and right—is that if there is a case for the concession for the majority shareholding there is a case for the concession in respect of other shareholdings. The

fallacy of the Minister's argument was that he asserted that they are to be distinguished from each other as black from white and that the majority shareholding is white, which passes through the gate where the relief is available, but the other shareholding, including that set out in my hon. Friend's amendment, is of a totally different kind.

Mr. Ridley: Surely the argument put forward is even more extraordinary. It is that while the majority shareholding is actually worth less, because it is a minority shareholding, the person will have to pay more tax. Less shares mean less value, but the person will have to pay more tax. He gets clobbered all the way along the line.

Sir G. Howe: The point that my hon. Friend mentions is that if the value of the minority shareholding is less per share than the value of the majority shareholding it seems hard to give that person no abatement of the kind promised for the majority shareholding. It may well be that the tax, in cash terms, is less, because the cash value of the share is less, but the rate at which it is biting is higher. I cannot believe it is right to allow the Government to take refuge in the argument they advance. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) says that this is another example of the way in which the Government are having gradually to retrace their steps by filling Finance Bill after Finance Bill, for years ahead, with reconstruction jobs in relation to the disastrous legislation they introduced last year. It is not for me to say what attitude my hon. Friend the Member for Basingstoke should take to the Government's response, but he may well be as dissatisfied as I am.

Mr. David Mitchell: I had anticipated that the Minister would respond in a much more generous and reasonable fashion, but in view of the fact that he has not it seems to me proper that we should vote on this matter.

Question put, That the clause be read a Second time:—

The House proceeded to a Division; but no Member being willing to act as Teller for the Ayes, Mr. DEPUTY SPEAKER declared that the Noes had it.

Question accordingly negatived.

New Clause 37

INCOME TAX: MAINTENANCE FUNDS FOR HISTORIC BUILDINGS

'Without prejudice to the provisions of Part XVI of the Taxes Act 1970 the income arising to trustees of a settlement, on which the Treasury has given a direction under subsection (1) of section 78 below, under sections 16 and 17 of the Finance Act 1973 shall be treated as the income of the trustees and not of any other person.'—[Mr. Hordern.]

Brought up, and read the First time.

3.15 a.m.

Mr. Hordern: I beg to move, That the clause be read a Second time.
I am glad to see the Financial Secretary in his place. Over the last two years during which we have had discussions on heritage amendments such as this, we have had the pleasure of the company of the Chief Secretary. Although his answers last year were relatively helpful, this year he has become stonier and stonier, so it is high time we had a change. I hope that the Financial Secretary's presence means that there will be a real improvement in the kind of answers we shall get.
The clause is concerned with the fund which is set aside to carry out repairs to heritage homes. When we discussed this matter in Committee it seemed that the Chief Secretary had not properly interpreted the purpose of the fund, a suggestion which we made a year ago. The Chief Secretary seemed to think that its purpose was that at any time it could be broken and that the resources in it could then be returned to those who had originally settled it, free of capital gains and capital transfer taxes.
My hon. Friend the Member for Bristol, West (Mr. Cooke) and I made it clear that that was not our intention. The purpose was to allow the fund to be applied for repairs and maintenance of historic buildings and for that purpose alone. Certainly, had the funds been distributed, capital transfer and capital gains taxes would have been payable. So the Chief Secretary misapprehended the basis of the fund in the first place. The new clause is intended to make it clear that the tax should be paid by the trustees of the fund and not by those who set up the fund or their successors.
To give an example of the kind of problem which arises, under the Bill as it stands, it is one thing for the settlor to be taxed on his income within the fund and on any expenditure which is made for repairs and maintenance. But after the settlor has disappeared from view or died, his successor will then be taxed not only at his own personal rate but, in the event of his carrying out any expenditure on repairs and maintenance, on the accumulated part of the fund—and all as if the income had been received in the course of the one year. Thus, on expenditure which might have amounted to£100,000 for a major repair, he could be taxed as if he had received£1 million or even more, because the accumulated sum by that time could be very large.
I hope that we did enough in Committee to show the Financial Secretary that there was no question of any tax evasion here. All that was required was the setting up of a fund devoted solely to repairs and maintenance. The principle was accepted by the Government if the fund was to be free of capital gains and capital transfer taxes. But now, if it is to be carried from one generation to another, it will be impossible to do these repairs at all, beyond one generation at any rate.
Those concerned with these matters are very worried about the position. They see no particular advantage in the fund as it has been put forward by the Government. I hope that the Financial Secretary will be able to give an encouraging reply. I am sure that he has had plenty of time to consider the matter and will recognise that this objective is welcomed on both sides of the House.

Dr. Jeremy Bray: Since the provision for maintenance funds is very useful, would the hon. Gentleman agree to support the deletion of the clause altogether?

Mr. Hordern: Deletion of the new clause?

Dr. Bray: Yes.

Mr. Hordern: My reading of the new clause must be very different from the hon. Gentleman's. With the solitary exception of the hon. Gentleman, I think


that there is widespread agreement on both sides of the House that we want to find the best way of maintaining these heritage houses as cheaply as can reasonably be done. The best way would seem to be to allow those who live in them to carry out repairs as expeditiously and cheaply as possible. I suggest that this is the best way to do that. I hope that the Financial Secretary will feel able to accept the new clause so that this purpose, which is commonly agreed on both sides, can be carried out.

Mr. Robert Sheldon: The hon. Member for Horsham and Crawley (Mr. Hordern) seemed to see some sign of hope in the fact that I was to reply to the debate. The hon. Gentleman mentioned the stony replies that he received from my right hon. Friend the Chief Secretary. I cannot offer the hon. Gentleman very much hope here, but I can offer some understanding of the problem that he explained.
We discussed this matter in Committee upstairs. The hon. Gentleman said that he believed that the Chief Secretary was under some misapprehension as to the purposes that he had in mind. Indeed, the hon. Gentleman said that he certainly did not wish to see the fund that he has described broken up and returned so that avoidance of capital transfer tax and capital gains tax was possible. The hon. Gentleman pointed out that his whole purpose was to allow the fund to be used solely for the maintenance of historic houses. If this money were distributed, he accepts that CTT and CGT should be payable.
The hon. Gentleman described the position after a settlor had died. I have been trying to follow his argument. As I see it, the clause would limit the income tax charge on the income from the maintenance fund set up in accordance with Clause 78 to the trust rate of 50 per cent., provided that the settlement was made by someone other than the owner of the historic house or his wife. Settlements set up by the owner of the house, or by his wife, would still be caught by the settlement provisions, so that the income from the fund would normally be treated as the settlor's income.
Clause 78 gives exemption from capital transfer tax on the setting up of the

maintenance fund and the new clause would give income tax concessions on the income from funds of that kind.
The current position under the income tax law is that, if such a fund is set up and the settlor is still living, income paid out on maintenance or accumulated in trust is taxable—the hon. Gentleman accepted that—at the settlor's marginal rate, which may be up to 98 per cent., as we know. But if the settlor is dead, the income paid out on maintenance is liable to be taxable at the new owner's marginal rate, while income which has accumulated in trust will be liable to tax at the rate of 50 per cent.
If the clause is accepted, we should be giving income tax relief as well as capital transfer tax relief. I do not know whether I am as stony as my right hon. Friend, but we believe that this is an excessive privilege. The relief we have accepted is the relief from capital transfer tax. We believe that we have been as helpful as can be.
These are early days. Obviously, as with the introduction of any new provision, we shall want to take advantage of the opportunity of seeing how the thing works out. I am sure that both the hon. Member and I will be around for some time to discuss the way in which these matters progress. I am sure that he will bring other matters to my attention, to which I shall be happy to listen with the respect that I always accord to whatever he puts before me. Perhaps if the arguments change in his direction I shall obviously be prepared to listen to them with understanding and possibly even with sympathy.

Mr. Hordern: The Minister's reply was disappointing. It was, however, couched in friendly terms. I am therefore certain that he will be subjected to a number of requests to discuss these matters. He may understand that this will cause disappointment to those who have put a great deal of time and work in proposing this fund, the principle of which was in any case accepted by the Government. Whether this matter is dealt with by the Chief Secretary or the Financial Secretary, the Minister will be asked to receive a number of submissions in due course. I hope that better considerations will prevail at the time of the next Finance Bill, despite whatever the hon. Member


for Motherwell and Wishaw (Dr. Bray) may think about it when it comes.
On that basis, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Further consideration of the Bill, as amended, adjourned.—[Mr. Robert Sheldon.]

Bill, not amended (in the Committee) and as amended (in the Standing Committee), to be further considered this day.

NEW ROXBORO HOTEL, ROSTREVOR

Motion made, and Question proposed, That this House do now adjourn.—[Mr. John Ellis.]

3.27 a.m.

Mr. J. Enoch Powell: I imagine that anyone hearing that a debate was to be initiated on the Adjournment on the subject of compensation for damage in Northern Ireland would assume that one or other, or one or both, of two aspects would be at issue —namely, the inadequacy of compensation or the delay in assessing and paying it. I admit that the majority of the correspondence on this subject which I have had with the Minister of State's Office has been on one or other of those two aspects.
Perhaps I might take the opportunity of paying tribute to the fact that in a difficult area the replies which he and his colleagues have given have, upon the whole, been helpful both to myself and to my constituents. However, this morning is an exception. The complaint which I wish to make this morning is against excessive compensation—compensation so excessive as to amount to a public scandal and therefore to render it necessary that the facts should be registered publicly by means of this debate, so that the desirability of a recurrence being in due course prevented should be fully and publicly accepted.
I shall briefly explain the circumstances. Towards the end of 1972 the New Roxboro Hotel, Rostrevor, which is near Newry in my constituency,

changed hands at a price, I understand, of just under £20,000. Improvements were subsequently made. I am prepared to assume that those improvements might even have doubled the value of the property. Unfortunately it was severely—indeed hopelessly—damaged by terrorist action in 1973.
A claim for compensation was made, and right at the beginning of this year it became known that the Northern Ireland Office had agreed with the claimants a settlement in the amount of £360,000. You will imagine, Mr. Deputy Speaker, the consternation which the news of such a settlement caused not only in my constituency but more widely when this was reported. A property of which the value at the time of destruction was about £40,000 had in the course of two or three years, by reason of its destruction, attracted an agreed compensation of £360,000.
I should say that it was part of the agreement, accepted by the claimants in the settlement with the Department, that if the hotel were not substantially rebuilt by 1978, £100,000 of the £360,000 would be repayable. However, even upon that hypothesis an accrual of about £220,000 would have been achieved by reason of the destruction of the premises. If that is pitching it too high, by reason of inflation and the lapse of time, it cannot be denied that an enormous capital gain would be made simply by the fact that the property was destroyed and not replaced.
I cannot believe that this can be right or justifiable. I appreciate—or at least hope that I am correct in appreciating—that the sum, whether the larger or the smaller, will attract capital gains tax at a severe rate. I do not expect the Minister of State to make a precise statement on that subject, because it is the very proper rule that the tax affairs of individuals or individual companies are not discussed. Nevertheless, I hope that the Minister will be able to indicate in general terms that in such circumstances, without specific reference to this case, capital gains tax would be applicable. Even so, when all that has been taken into account, there is something clearly wrong when compensation is agreed at a level of this kind in such circumstances.
Perhaps I should say a word about the fact that the compensation was agreed


and not adjudicated by a court. I understand that this took place because the Department believed that if it had not agreed with its adversary it might have found that the sum awarded by the court was higher still. It is clearly a matter of judgment, and I dare say that the Department was guided by its professional advisers. All I have to say on that is that if that be the case, the unsatisfactory nature of the law or the practice of the courts is even more crassly revealed than if this had been a direct adjudication.
I understand that the general principle by which the courts are at present guided, and by which the Department assumed they would be likely to be guided in this instance, is not to have regard to the alteration of the market value of property after damage but to assess the cost of the complete reinstatement of the damaged or destroyed property as new. I suppose that to reinstate a Scottish baronial hotel in 1978 on the shores of Carlingford Lough might prove a very expensive operation. I accept that there may be different types of case where it is proper to regard the cost of reinstatement and enabling the people affected to carry on in business as proper criteria.
However, something is clearly badly wrong with the present rules, practices or laws if there could ever be a repetition of the monstrous and scandalous outcome of this case.
When I use those harsh expressions, I am not implying any malfeasance on the part of the claimants in this case. As the law stands, they are evidently entitled to the amount of the settlement, but that does not make the scandalous nature of the circumstances any more acceptable to the general public. There are many people in my constituency and in Northern Ireland who, for various reasons, suffer very severe damage as a result of terrorist action and are unable to obtain full or even, in some cases, partial compensation. It is a matter of public interest that, quite apart from the sums involved, anything of this kind should be prevented from recurring.
No doubt the Minister will confirm that there is an investigation, not merely in progress but terminating, on the reform of the law governing compensation for damage to property by terrorist

action. Whatever legislation or reform follows that review, the Government must include provisions to prevent a recurrence of the situation I have described and ensure that even if reinstatement is taken into account as a criterion for compensation, it can never again result in grossly excessive, unrealistic compensation being the outcome, as in this case.

3.37 a.m.

The Minister of State, Northern Ireland Office (Mr. J. D. Concannon): The right lion Member for Down, South (Mr. Powell) will realise that we are debating this matter in the usual Northern Ireland debating hours.

Mr. Powell: It is worse than usual.

Mr. Concannon: Perhaps it is slightly worse than usual. I thank the right hon. Member for the way in which he raised this subject. He showed that he understood the difficulty in which we find ourselves over this legislation.
My right hon. Friend the Secretary of State for Northern Ireland is gravely concerned, as are all hon. Members, about the amount of compensation being paid for criminal damage to property in Northern Ireland. The responsibility for meeting the cost lies with the United Kingdom taxpayer. The system is governed by the Criminal Injuries to Property (Compensation) Act (Northern Ireland) 1971. This was passed by the former Stormont Parliament.
The law provides that if the amount of compensation offered in settlement is disputed by the claimant, he can have his claim determined by the courts, and my right hon. Friend, as respondent to the claimant, is legally bound to pay what the Court decides. Compensation is now paid by the Northern Ireland Office from moneys voted by this House.
As the House has been informed before, the sums we are having to pay are substantial and cannot be considered lightly. For criminal injuries to property, the amount paid out under the 1971 Act as compensation in the last three years was of the order of £28 million, £40 million and £46 million respectively. The House will not fail to note the steep annual increase.
There are a number of reasons for my right hon. Friend's concern. The first is


that we all deplore the deliberate and vicious, but quite senseless, criminal acts which are responsible for damage and destruction. Those who plan and execute these acts, whoever they are, and whatever they purport to believe, will never succeed by this means in deflecting the Government from their policies.
Nor, I am sure, will the criminals responsible succeed in crushing the spirit of the people of Northern Ireland, who alone suffer from these mindless acts of destruction. We must look to the community itself to support the forces of law and order in order to root out and eliminate the evil sources of criminal devastation of the Province's own resources.
The second principal reason for concern is that the costs of compensation are a severe drain on national resources which could so much better be used for more productive purposes.
Thirdly, the present legislative framework for payment of compensation and the practical effects which this produces can lead in certain cases to situations in which the compensation paid might well be thought to be anomalous—and even in some cases an abuse. There are not many such but those that do exist stick out like a sore thumb.
The right hon. Member has made his point about one such case—the New Roxboro Hotel at Rostrevor. I would not dissent from what the right hon. Member has said about this case, but it would not be right for me to comment in detail on the process of settlement which was arrived at, in accordance with the statutory procedure, in the light of professional legal advice, and always subject to the final decision of the courts. The net costs to the taxpayer have to be taken carefully into consideration. These include the costs of court hearings, fees to counsel, and staff time. The likely views of the court, based on precedent, when settlement is still open, must also weigh heavily.
Although it is not right for me to go into the details of the process of settlement in the case of the New Roxboro Hotel it is right, and I am glad to do so, that I should say something of general application arising from the circumstances in the case.
Compensation in a case of this kind may be claimed first for the building itself, next for its contents, and finally for the so-called consequential loss suffered as a result. But the Act as it stands gives no guidence as to the basis on which the compensation should be assessed. The House will wish to judge for itself whether this imprecision in the law is a situation which it is appropriate or right to leave in being.
But the effect of the legal situation which at present applies is that where a building has been totally destroyed or destroyed beyond repair, compensation could range from market value, on the one hand, to the cost of rebuilding, or reinstatement, at the other extreme. The gap between the two can be very substantial indeed.
For lack of precision in the law, cases have undoubtedly occurred in which awards by the courts based on rebuilding or reinstatement have been made, thus setting a precedent, in which the viability of the premises before damage was such as to raise more than a reasonable presumption of doubt in the mind of the ordinary person whether they could have been rebuilt had they been damaged in circumstances other than those compensable under the 1971 Act. In this case I can illustrate the point most vividly by saying that the reinstatement value claimed by the owners was eight times greater than the net loss in market value of the property, as professionally estimated by the Commissioner of Valuation.
A further question then arises. There is no provision in the present Act to require actual rebuilding. There have been a number of cases—but I must add that there is no evidence whatever that this will apply in the case referred to by the right hon. Member—and I believe indeed that such cases are probably and fortunately few in relation to the number of awards made—in which the cost of reinstatement—far in excess of the market value of the property, has been awarded, yet there has so far been no obvious attempt to carry out rebuilding. Nevertheless such cases are conspicuous and the public interest requires that they be ventilated.
What has happened to the compensation awarded in these cases is not something on which I need to speculate. Indeed—and I hasten to add this—there may be understandable reasons for the absence of visible reinvestment in bricks and mortar, planning permission, damage to adjoining property, the security situation. In such cases the bona fides of the applicants' assurance to the court which heard the case may not be open to question.
I have said enough to illustrate the very difficult problems in this area to which the present Act gives rise, and to which, as I shall explain, my right hon. Friend the Secretary of State is now addressing himself.
In this particular case—and the right hon. Member has mentioned this—the officials of the Northern Ireland Office, very properly in my view, have done their best in reaching a settlement within the coinstraints of the law.
Although there is no power in the Act, as I have said, to enable this to be done, the settlement was made on the basis of agreement that £100,000 of the payment would be refunded if the claimant did not reinstate the hotel by the summer of 1978. How this might be enforceable is hypothetical but the very fact that it was done is unquestionably right. And I see advantage that it should be noted by this House. This is one of the reasons why I accept gladly that this debate will be a good thing.
One further point of general application arises from this case. I have mentioned consequential loss as a further element for which a claim may be made and on which the Act gives no precise guidance, though a series of judgments in the courts have allowed very substantial compensation to be paid under this heading. The phrase, in the case of a business enterprise, means in effect loss of profits. It can also even cover such claims as for demolition, site clearance, and foundation work. I need only say here that the Northern Ireland Office, in this case, mindful of the public interest generally, negotiated a settlement which was, again—and this is purely coincidental—about one-eighth of the amount originally claimed by the owners under this heading.
The right hon. Member has referred to the application of capital gains tax in

cases of this kind. Here I need only say that I am satisfied that the Commissioners of Inland Revenue have been fully appraised of the circumstances in which compensation of this kind may be paid and will no doubt draw such conclusions as may be appropriate in this and other similar cases.
The right hon. Member's intervention today has served his purpose. My right hon. Friend the Secretary of State acknowledges much of what he says and agrees above all that the public in Northern Ireland and indeed throughout the United Kingdom should be fully aware of the issues. Society must understand the implications of criminal acts committed by members of that society. Though these are few in number the consequences of their evil deeds are a burden upon all. It is for the Community to consider how far this can be allowed to go on.
My right hon. Friend has long been aware of the need for a review of the situation. The House will recall that on 24th November last he announced that he was setting up a committee under the chairmanship of Sir James Waddell to review the principles and operations of the Act and to report to him. My right hon. Friend expects to receive the report of this committee towards the end of this month.
From what I have said—and I have only touched on some of the problems of the current system—the House will realise that the question of payment of compensation for property damage in Northern Ireland today is complex and raises many and far-reaching issues. These include public expenditure and the burden on the United Kingdom taxpayer; the risks of anomaly or abuse; the problems of maintenance of the commercial and industrial life blood of the community; problems of avoiding social injustice and genuine hardship; and the need to prevent criminals and terrorists from benefiting in any way from their misdeeds.
Moreover, since my right hon. Friend invited Sir James Waddell and his committee to review the situation, the question of economy in public expenditure has become of increasing importance. The very necessary pressures to contain public resources and expenditure and to use them


as productively as possible are of heightened importance.
Thus my right hon. Friend must naturally take some time to study all the implications of the report and to form his own views. He intends to proceed with all despatch and positively. No doubt he will find that the Waddell Committee will point him on the way to his further consideration of what should be done in the sort of case referred to tonight, and in other areas as well. He will need to reflect and to make up his mind on what should be done over the whole field. He will no doubt take carefully into account what the right hon. Member has said in raising this particular case tonight.
With all this in mind, my right hon. Friend intends to proceed, as the House has already been informed, by introducing proposals for amending legislation in the

autumn. He will do so in the light of his mature consideration of the report, which he then has it in mind to publish, simultaneously with his own proposals for amending the present Act as appropriate by Order in Council. These proposals will be accompanied by an explanatory memorandum. There will, of course, be an opportunity for the proposals to be debated.
I thank the right hon. Gentleman fox the way in which he raised the matter. It is very valuable that this case and others like it should be given an airing.

Mr. Powell: I am very much obliged to the Minister of State.

Question put and agreed to.

Adjourned accordingly at nine minutes to Four o'clock a.m.

FINANCE BILL

Division List No. 240[see col. 402]


Division No. 240.
AYES
[4.55 p.m.


Allaun, Frank
Fraser, John (Lambeth, N'w'd)
Murray, Rt Hon Ronald King


Anderson, Donald
George, Bruce
Newens, Stanley


Archer, Peter
Gilbert, Dr John
Oakes, Gordon


Armstrong, Ernest
Ginsburg, David
Ogden, Eric


Ashton, Joe
Golding, John
Orbach, Maurice


Atkins, Ronald (Preston N)
Gould, Bryan
Park, George


Atkinson, Norman
Gourlay, Harry
Parker, John


Barnett, Rt Hon Joel (Heywood)
Graham, Ted
Parry, Robert


Bennett, Andrew (Stockport N)
Grant, George (Morpeth)
Pavitt, Laurie


Bidwell, Sydney
Grant, John (Islington C)
Peart, Rt Hon Fred


Bishop, E. S.
Grocott, Bruce
Pendry, Tom


Blenkinsop, Arthur
Hamilton, James (Bothwell)
Perry, Ernest


Boardman, H.
Harper, Joseph
Phipps, Dr Colin


Booth, Rt Hon Albert
Harrison, Walter (Wakefield)
Prentice, Rt Hon Reg


Bottomley, Rt Hon Arthur
Hatton, Frank
Price, C. (Lewisham W)


Boyden, James (Bish Auck)
Hayman, Mrs Helens
Price, William (Rugby)


Bray, Dr Jeremy
Healey, Rt Hon Denis
Roberts, Albert (Normanton)


Brown, Hugh D. (Provan)
Heffer, Eric S.
Robinson, Geoffrey


Brown, Robert C. (Newcastle W)
Hooley, Frank
Roderick, Caerwyn


Brown, Ronald (Hackney S)
Horam, John
Rodgers, George (Chorley)


Buchan, Norman
Hoyle, Doug (Nelson)
Rodgers, William (Stockton)


Buchanan, Richard
Huckfield, Lee
Rooker, J. W.


Butler, Mrs Joyce (Wood Green)
Hughes, Rt Hon C. (Anglesey)
Roper, John


Callaghan, Jim (Middleton &amp; P)
Hughes, Robert (Aberdeen N)
Rose, Paul B.


Campbell, Ian
Hughes, Roy (Newport)
Ross, Rt. Hon W. (Kilmarnock)


Canavan, Dennis
Hunter, Adam
Rowlands, Ted


Cant, R. B.
Irvine, Rt Hon Sir A. (Edge Hill)
Sandelson, Neville


Carmichael, Neil
Jackson, Colin (Brighouse)
Sedgemore, Brian


Carter, Ray
Jackson, Miss Margaret (Lincoln)
Selby, Harry


Carter-Jones, Lewis
Janner, Greville
Sheldon, Robert (Ashton-u-Lyne)


Cartwright, John
Jay, Rt Hon Douglas
Shore, Rt Hon Peter


Castle, Rt Hon Barbara
Jeger, Mrs Lena
Short, Rt Hon E. (Newcastle C)


Clemitson, Ivor
John, Brynmor
Short, Mrs Renée (Wolv NE)


Cocks, Michael (Bristol S)
Johnson, Walter (Derby S)
Silkin, Rt Hon John (Deptford)


Cohen, Stanley
Jones, Barry (East Flint)
Silkin, Rt Hon S. C. (Dulwich)


Coleman, Donald
Jones, Dan (Burnley)
Silverman, Julius


Colquhoun, Ms Maureen
Judd, Frank
Skinner Dennis


Concannon, J. D.
Kaufman, Gerald
Small, William


Conlan, Bernard
Kelley, Richard
Smith, John (N Lanarkshire)


Cook, Robin F. (Edin C)
Kilroy-Silk, Robert
Stallard, A. W.


Corbett, Robin
Lamble, David
Stoddart, David


Craigen, J. M. (Maryhill)
Lamborn, Harry
Stott, Roger


Cronin, John
Lamond, James
Thomas, Jeffrey (Abertillery)


Crosland, Rt Hon Anthony
Latham, Arthur (Paddington)
Thomas, Ron (Bristol NW)


Crowther, Stan (Rotherham)
Leadbitter, Ted
Thorne, Stan (Preston South)


Cryer, Bob
Lestor, Miss Joan (Eton Slough)
Tinn, James


Cunningham, G. (Islington S)
Lewis, Ron (Carlisle)
Tomlinson, John


Cunningham, Dr J. (Whiteh)
Litterick, Tom
Tuck, Raphael


Davidson, Arthur
Lomas, Kenneth
Urwin, T. W.


Davies, Bryan (Enfield N)
Loyden, Eddie
Varley, Rt Hon Eric G


Davies, Denzil (Llanelll)
Luard, Evan
Wainwright, Edwin (Dearne V)


Davis, Clinton (Hackney C)
Mabon, Dr J. Dickson
Walker, Harold (Doncaster)


Dean, Joseph (Leeds West)
McElhone, Frank
Walker, Terry (Kingswood)


Dell, Rt Hon Edmund
McGuire, Michael (Ince)
Watkins, David


Dempsey, James
MacKenzie, Gregor
Watkinson, John


Doig, Peter
Mackintosh, John P.
Weetch, Ken


Dormand, J. D.
Maclennan, Robert
Weitzman, David


Duffy, A. E. P.
McNamara, Kevin
White, Frank R. (Bury)


Dunn, James A.
Madden, Max
White, James (Pollok)


Dunnett, Jack
Magee, Bryan
Willey, Rt Hon Frederick


Dunwoody, Mrs Gwyneth
Mahon, Simon
Williams, Alan Lee (Hornch'ch)


Eadie, Alex
Mallalieu, J. P. W.
Williams, Rt Hon Shirley (Hertford)


Edge, Geoff
Marks, Kenneth
Williams, W. T. (Warrington)


Edwards, Robert (Wolv SE)
Marquand, David
Wilson, Alexander (Hamilton)


E[...]s, John (Brigg &amp; Scun)
Marshall, Dr. Edmund (Goole)
Wilson, Rt Hon Sir Harold (Huyton)


English, Michael
Marshall, Jim (Leicester S)
Wilson, William (Coventry SE)


Ennals, David
Mason, Rt Hon Roy
Wise, Mrs Audrey


Evans, Ioan (Aberdare)
Maynard, Miss Joan
Woodall, Alec


Ewing, Harry (Stirling)
Meacher, Michael
Woof, Robert


Faulds, Andrew
Mellish, Rt Hon Robert
Wrigglesworth, Ian


Fernyhough, Rt Hon E.
Mendelson, John
Young, David (Bolton E)


Fitt, Gerard (Belfast W)
Mikardo, Ian



Flannery, Martin
Millan, Bruce
TELLERS FOR THE AYES:


Foot, Rt Hon Michael
Miller, Dr M. S. (E Kilbride)
Mr. Peter Snape and


Ford, Ben
Molloy, William
Mr. Alf Bates.


Forrester, John
Morris, Charles R. (Openshaw)








NOES


Aitken, Jonathan
Griffiths, Eldon
Nelson, Anthony


Arnold, Tom
Grimond, Rt Hon J.
Neubert, Michael


Atkins, Rt Hon H. (Spelthorne)
Grist, Ian
Newton, Tony


Awdry, Daniel
Grylls, Michael
Nott, John


Bain, Mrs Margaret
Hall, Sir John
Onslow, Cranley


Baker, Kenneth
Hall-Davis, A. G. F.
Oppenheim, Mrs Sally


Bell, Ronald
Hamilton, Michael (Salisbury)
Page, John (Harrow West)


Bennett, Sir Frederic (Torbay)
Hampson, Dr Keith
Page, Rt Hon R. Graham (Crosby)


Bennett, Dr Reginald (Fareham)
Hannam, John
Parkinson, Cecil


Benyon, W.
Harrison, Col Sir Harwood (Eye)
Penhaligon, David


Berry, Hon Anthony
Harvie Anderson, Rt Hon Miss
Percival, Ian


Boscawen, Hon Robert
Hastings, Stephen
Peyton, Rt Hon John


Bottomley, Peter
Hawkins, Paul
Price, David (Eastleigh)


Boyson, Or Rhodes (Brent)
Hayhoe, Barney
Pym, Rt Hon Francis


Brittan, Leon
Hicks, Robert
Raison, Timothy


Brocklebank-Fowler, C.
Holland, Philip
Rees, Peter (Dover &amp; Deal)


Brotherton, Michael
Hordern, Peter
Reid, George


Bryan, Sir Paul
Howe, Rt Hon Sir Geoffrey
Ridley, Hon Nicholas


Buchanan-Smith, Alick
Howell, David (Guildford)
Roberts, Michael (Cardiff NW)


Buck, Antony
Howell, Ralph (North Norfolk)
Rodgers, Sir John (Sevenoaks)


Bulmer, Esmond
Hunt, John
Ross, Stephen (Isle of Wight)


Butler, Adam (Bosworth)
Hurd, Douglas
Rost, Peter (SE Derbyshire)


Carlisle, Mark
Hutchison, Michael Clark
Sainsbury, Tim


Chalker, Mrs Lynda
James, David
St. John-Stevas, Norman


Channon, Paul
Jenkin, Rt Hon P. (Wanst'd &amp; W'd'fd)
Shaw, Giles (Pudsey)


Churchill, W. S.
Jessel, Toby
Sims, Roger


Clark, William (Croydon S)
Johnson Smith, G. (E Grinstead)
Sinclair, Sir George


Clarke, Kenneth (Rushcliffe)
Johnston Russell (Inverness)
Skeet, T. H. H.


Clegg, Walter
Jones, Arthur (Daventry)
Smith, Cyril (Rochdale)


Cockcroft, John
Jopling, Michael
Speed, Keith


Cooke, Robert (Bristol W)
King, Evelyn (South Dorset)
Spence, John


Cope, John
King, Tom (Bridgwater)
Spicer, Jim (W. Dorset)


Cordle, John H.
Kitson, Sir Timothy
Sproat, Iain


Cormack, Patrick
Knight, Mrs Jill
Stanbrook, Ivor


Costain, A. P.
Knox, David
Stanley John


Crawford, Douglas
Lamont, Norman
Steel, David (Roxburgh)


Crouch, David
Lawre[...]e, Ivan
Stewart, Ian (Hitchin)


Crowder, F. P.
Lawson, Nigel
Stokes, John


Davies, Rt Hon J. (Knutsford)
[...]e Marchant, Spencer
Stradling Thomas, J.


Dean, Paul (N Somerset)
Lester, Jim (Beeston)
Taylor, R. (Croydon NW)


Douglas-Hamilton, Lord James
Lloyd, Ian
Taylor, Teddy (Cathcart)


Dunlop, John
Loveridge, John
Tebbit, Norman


Durant, Tony
Luce, Richard
Thatcher, Rt Hon Margaret


Edwards, Nicholas (Pembroke)
McAdden, Sir Stephen
Thomas, Dafydd (Merioneth)


Evans, Gwvnfor (Carmarthen)
Macfarlane, Neil
Thompson, George


Fairbairn, Nicholas
MacGregor, John
Thorpe, Rt Hon Jeremy (N Devon)


Fairgrieve, Russell
McNair-Wilson, P. (New Forest)
Townsend, Cyril D.


Farr, John
Mates, Michael
Tugendhat, Christopher


Fell, Anthony
Maude, Angus
Vaughan, Dr Gerard


Finsberg, Geoffrey
Maudling, Rt Hon Reginald
Viggers, Peter


Fisher, Sir Nigel
Mawby, Ray
Wainwright, Richard (Colne V)


Fletcher-Cooke, Charles
Maxwell-Hyslop, Robin
Wakeham, John


Forman, Nigel
Mayhew, Patrick
Walder, David (Clitheroe)


Fowler, Norman (Sutton C'f'd)
Meyer, Sir Anthony
Walker, Rt Hon P. (Worcester)


Freud, Clement
Miller, Hal (Bromsgrove)
Wall, Patrick


Gardiner, George (Reigate)
Mills, Peter
Watt, Hamish


Gardner, Edward (S Fylde)
Miscampbell, Norman
Weatherill, Bernard


Gilmour, Rt Hon Ian (Chesham)
Mitchell, David (Basingstoke)
Welsh, Andrew


Gilmour, Sir John (East Fife)
Moate, Roger
Wiggin, Jerry


Glyn, Dr Alan
Monro, Hector
Wigley, Dafydd


Godber, Rt Hon Joseph
Montgomery, Fergus
Wilson, Gordon (Dundee E)


Goodhart, Philip
Moore, John (Croydon C)
Winterton, Nicholas


Goodhew, Victor
More, Jasper (Ludlow)
Young, Sir G. (Ealing, Acton)


Gow, Ian (Eastbourne)
Morrison, Charles (Devizes)



Gower, Sir Raymond (Barry)
Morrison, Hon Peter (Chester)
TELLERS FOR THE NOES:


Grant, Anthony (Harrow C)
Mudd, David
Mr. Fred Silvester and


Gray, Hamish
Neave, Airey
Mr. Carol Mather.




Division List No. 241 [see col. 492]


Division No. 241.]
AYES
19.15 p.m.


Arnold, Tom
Bryan, Sir Paul
Cooke, Robert (Bristol W)


Atkins, Rt Hon H. (Spelthorne)
Buchanan-Smith, Alick
Cope, John


Awdry, Daniel
Bulmer, Esmond
Costain, A. P.


Baker, Kenneth
Burden, F. A.
Crouch, David


Bell, Ronald
Butler, Adam (Bosworth)
Crowder, F. P.


Bennett, Sir Frederic (Torbay)
Carlisie, Mark
Dean, Paul (N Somerset)


Bennett, Dr Reginald (Fareham)
Chalker, Mrs Lynda
Dodsworth, Geoffrey


Berry, Hon Anthony
Channon, Paul
Douglas-Hamilton, Lord James


Boyson, Dr Rhodes (Brent)
Churchill, W. S.
Dunlop, John


Braine, Sir Bernard
Clarke, Kenneth (Rushcliffe)
Durant, Tony


Brittan, Leon
Clegg, Walter
Edwards, Nicholas (Pembroke)


Brocklebank-Fowler, C.
Cockcroft, John
Elliott, Sir William







Fairgrieve, Russell
Knight, Mrs Jill
Rees, Peter (Dover &amp; Deal)


Farr, John
Knox, David
Renton, Tim (Mid-Sussex)


Finsberg, Geoffrey
Lamont, Norman
Ridsdale, Julian


Fisher, Sir Nigel
Lawrence, Ivan
Roberts, Michael (Cardiff NW)


Fletcher-Cooke, Charles
Lawson, Nigel
Ross, William (Londonderry)


Fowler, Norman (Sutton C 'f' d)
Lester, Jim (Beeston)
Rost, Peter (SE Derbyshire)


Gardiner, George (Reigate)
Lloyd, Ian
Sainsbury, Tim


Gilmour, Rt Hon Ian (Chesham)
Loveridge, John
Scott, Nicholas


Gilmour, Sir John (East Fife)
Luce, Richard
Shaw, Giles (Pudsey)


Glyn, Or Alan
McAdden, Sir Stephen
Shelton, William (Streatham)


Godber, Rt Hon Joseph
Macfarlane, Neil
Shepherd, Colin


Goodhew, Victor
MacGregor, John
Silvester, Fred


Gow, Ian (Eastbourne)
McNair-Wilson, M. (Newbury)
Sims, Roger


Gower, Sir Raymond (Barry)
McNair-Wilson, P. (New Forest)
Sinclair, Sir George


Grant, Anthony (Harrow C)
Maude, Angus
Skeet, T. H. H.


Gray, Hamish
Mawby, Ray
Speed, Keith


Grieve, Percy
Maxwell-Hyslop, Robin
Spence, John


Grist, Ian
Mayhew, Patrick
Spicer, Jim (W. Dorset)


Hall, Sir John
Meyer, Sir Anthony
Spicer, Michael (S Worcester)


Hall-Davis, A. G. F.
Miller, Hal (Bromsgrove)
Sproat, Iain


Hamilton, Michael (Salisbury)
Mills, Peter
Stainton, Keith


Hampson, Dr Keith
Miscampbell, Norman
Stanbrook, Ivor


Hannam, John
Mitchell, David (Basingstoke)
Stanley, John


Harrison, Col Sir Harwood (Eye)
Moate, Roger
Steen, Anthony (Wavertree)


Harvie Anderson, Rt Hon Miss
Molyneaux, James
Stewart, Ian (Hitchin)


Hastings, Stephen
Monro, Hector
Stokes, John


Havers, Sir Michael
Montgomery, Fergus
Taylor, R. (Croydon NW)


Hawkins, Paul
Moore, John (Croydon C)
Taylor, Teddy (Cathcart)


Hayhoe, Barney
More, Jasper (Ludlow)
Tebbit, Norman


Hicks, Robert
Morgan-Giles, Rear-Admiral
Temple-Morris, Peter


Holland, Philip
Morrison, Hon Peter (Chester)
Thatcher, Rt Hon Margaret


Hordern, Peter
Mudd, David
Tugendhat, Christopher


Howe, Rt Hon Sir Geoffrey
Neave, Airey
Viggers, Peter


Howell, David (Guildford)
Nelson, Anthony
Wakeham, John


Howell, Ralph (North Norfolk)
Neubert, Michael
Walder, David (Clitheroe)


Hunt, David (Wirral)
Newton, Tony
Walker, Rt Hon P. (Worcester)


Hunt, John (Bromley)
Nott, John
Wail, Patrick


Hurd, Douglas
Onslow, Cranley
Warren, Kenneth


Hutchison, Michael Clark
Oppenheim, Mrs Sally
Weatherill, Bernard


James, David
Page, John (Harrow West)
Wiggin, Jerry


Jessel, Toby
Page, Rt Hon R. Graham (Crosby)
Winterton, Nicholas


Jones, Arthur (Daventry)
Parkinson, Cecil
Wood, Rt Hon Richard


Jopling, Michael
Percival, Ian
Young, Sir G. (Ealing, Acton)


Kaberry, Sir Donald
Powell, Rt Hon J. Enoch



Kilfedder, James
Price, David (Eastleigh)
TELLERS FOR THE AYES:


King, Evelyn (South Dorset)
Raison, Timothy
Mr. Max Madden and


King, Tom (Bridgwater)
Rathbone, Tim
Mr. Spencer Le Marchant.


Kitson, Sir Timothy






NOES


Allaun, Frank
Cartwright, John
Edwards, Robert (Wolv SE)


Anderson, Donald
Castle, Rt Hon Barbara
Ellis, John (Brigg &amp; Scun)


Archer, Peter
Clemitson, Ivor
Evans, Gwynfor (Carmarthen)


Armstrong, Ernest
Cocks, Michael (Bristol S)
Evans, Ioan (Aberdare)


Ashton, Joe
Cohen, Stanley
Ewing, Harry (Stirling)


Atkins, Ronald (Preston N)
Coleman, Donald
Fernyhough, Rt Hon E.


Atkinson, Norman
Colquhoun, Ms Maureen
Flannery, Martin


Bain, Mrs Margaret
Concannon, J. D.
Fletcher, Ted (Darlington)


Barnett, Rt Hon Joel (Heywood)
Conlan, Bernard
Foot, Rt Hon Michael


Bates, Alt
Cook, Robin F. (Edin C)
Ford, Ben


Bean, R. E.
Corbett, Robin
Forrester, John


Beith, A. J.
Craigen, J. M. (Maryhill)
George, Bruce


Bennett, Andrew (Stockport N)
Crawford, Douglas
Gilbert, Dr John


Bidwell, Sydney
Cronin, John
Ginsburg, David


Bishop, E. S.
Crosland, Rt Hon Anthony
Golding, John


Blenkinsop, Arthur
Cryer, Bob
Gould, Bryan


Boardman, H.
Cunningham, G. (Islington S)
Gourlay, Harry


Booth, Rt Hon Albert
Cunningham, Dr J. (Whiteh)
Graham, Ted


Bottomley, Rt Hon Arthur
Davidson, Arthur
Grant, George (Morpeth)


Boyden, James (Bish Auck)
Davies, Bryan (Enfield N)
Grant, John (Islington C)


Bray, Dr Jeremy
Davies, Denzil (Llanelli)
Grocott, Bruce


Brown, Hugh D. (Provan)
Davis, Clinton (Hackney C)
Harper, Joseph


Brown, Robert C. (Newcastle W)
Deakins, Eric
Harrison, Walter (Wakefield)


Brown, Ronald (Hackney S)
Dean, Joseph (Leeds West)
Hayman, Mrs Helena


Buchan, Norman
Dell, Rt Hon Edmund
Heffer, Eric S.


Buchanan, Richard
Dempsey, James
Henderson, Douglas


Butler, Mrs Joyce (Wood Green)
Doig, Peter
Hooley, Frank


Callaghan, Jim (Middleton &amp; P)
Dormand, J. D.
Horam, John


Campbell, Ian
Duffy, A. E. P.
Howells, Geraint (Cardigan)


Canavan, Dennis
Dunn, James A.
Hoyle, Doug (Nelson)


Cant, R. B.
Dunnett, Jack
Huckfield, Les


Carmichael, Neil
Dunwoody, Mrs Gwyneth
Hughes, Robert (Aberdeen N)


Carter, Ray
Eadie, Alex
Hughes, Roy (Newport)


Carter-Jones, Lewis
Edge, Geoff
Hunter, Adam







Irvine, Rt Hen Sir A. (Edge Hill)
Murray, Rt Hon Ronald King
Snape, Peter


Jackson, Colin (Brighouse)
Newens, Stanley
Stainton, Keith


Jackson, Miss Margaret (Lincoln)
Oakes, Gordon
Stallard, A. W.


Janner, Greville
Ogden, Eric
Steel, David (Roxburgh)


John, Brynmor
Ovenden, John
Stott, Roger


Johnson, James (Hull West)
Park, George
Strang, Gavin


Johnson, Walter (Derby S)
Parker, John
Thomas, Dafydd (Merioneth)


Johnston, Russell (Inverness)
Parry, Robert
Thomas, Ron (Bristol NW)


Jones, Barry (East Flint)
Pavitt, Laurie
Thompson, George


Jones, Dan (Burnley)
Peart, Rt Hon Fred
Thorne, Stan (Preston South)


Judd, Frank
Pendry, Tom
Tinn, James


Kaufman, Gerald
Penhaligon, David
Tomlinson, John


Kilroy-Silk, Robert
Perry, Ernest
Tuck, Raphael


Lambie, David
Phipps, Dr Colin
Urwin, T. W.


Lamborn, Harry
Prentice, Rt Hon Reg
Varley, Rt Hon Eric G


Lamond, James
Price, William (Rugby)
Wainwright, Edwin (Dearne V)


Lestor, Miss Joan (Eton &amp; Slough)
Rees, Rt Hon Merlyn (Leeds S)
Wainwright, Richard (Colne V)


Lewis, Ron (Carlisle)
Raid, George
Walker, Harold (Doncaster)


Litterick, Tom
Richardson, Miss Jo
Walker, Terry (Kingswood)


Lomas, Kenneth
Roberts, Albert (Normanton)
Watkins, David


Luard, Evan
Roberts, Gwilym (Cannock)
Watkinson, John


Lyons, Edward (Bradford W)
Robinson, Geoffrey
Watt, Hamish


Mabon, Dr J. Dickson
Roderick, Caerwyn
Weetch, Ken


McCartney, Hugh
Rodgers, George (Chorley)
Weitzman, David


McElhone, Frank
Rodgers, William (Stockton)
Welsh, Andrew


McGuire, Michael (Ince)
Rooker, J. W.
White, Frank R. (Bury)


Mackintosh, John P.
Roper, John
White, James (Pollok)


Maclennan, Robert
Rose, Paul B.
Wigley, Dafydd


McMillan, Tom (Glasgow C)
Ross, Stephen (Isle of Wight)
Willey, Rt Hon Frederick


Madden, Max
Ross, Rt. Hon W. (Kilmarnock)
Williams, Alan Lee (Hornch'ch)


Magee, Bryan
Rowlands, Ted
Williams, Rt Hon Shirley (Hertford)


Mahon, Simon
Sandelson, Neville
Williams, Sir Thomas


Marks, Kenneth
Sedgemore, Brian
Wilson, Alexander (Hamilton)


Marshall, Dr. Edmund (Goole)
Selby, Harry
Wilson, Gordon (Dundee E)


Mason, Rt Hon Roy
Shaw, Arnold (Ilford South)
Wilson, Rt Hon Sir Harold (Huyton)


Maynard, Miss Joan
Sheldon, Robert (Ashton-u-Lyne)
Wilson, William (Coventry SE)


Meacher, Michael
Shore, Rt Hon Peter
Wise, Mrs Audrey


Mellish, Rt Hon Robert
Short, Rt Hon E. (Newcastle C)
Woof, Robert


Mendelson, John
Silkin, Rt Hon John (Deptford)
Wrigglesworth, Ian


Mikardo, Ian
Silkin, Rt Hon S. C. (Dulwich)
Young, David (Bolton E)


Millan, Bruce
Silverman, Julius



Miller, Dr M. S. (E Kilbride)
Skinner Dennis
TELLERS FOR THE NOES:


Molloy, William
Smith, Cyril (Rochdale)
Mr. James Hamilton and


Morris, Charles R. (Openshaw)
Smith, John (N Lanarkshire)
Mr. David Stoddart.

Division List No. 242 [see col. 524]


Division No. 242.]
AYES
[10.59 p.m.


Arnold, Tom
Fairgrieve, Nicholas
Howells, Geraint (Cardigan)


Atkins, Rt Hon H. (Spelthorne)
Farr, John
Hunt, David (Wirral)


Awdry, Daniel
Finsberg, Geoffrey
Hunt, John (Bromley)


Bain, Mrs Margaret
Fisher, Sir Nigel
Kurd, Douglas


Baker, Kenneth
Fowler, Norman (Sutton C'f'd)
Hutchison, Michael Clark


Beith, A. J.
Gardiner, George (Reigate)
Jenkin, Rt Hon P. (Wanst'd &amp; W'd'fd)


Bennett, Sir Frederic (Torbay)
Gilmour, Rt Hon Ian (Chesham)
Jessel, Toby


Berry, Hon Anthony
Gilmour, Sir John (East Fife)
Johnson Smith, G. (E Grinstead)


Boscawen, Hon Robert
Glyn, Dr Alan
Johnston, Russell (Inverness)


Boyson, Dr Rhodes (Brent)
Godber, Rt Hon Joseph
Jopling, Michael


Braine, Sir Bernard
Goodhart, Philip
Kaberry, Sir Donald


Brittan, Leon
Goodhew, Victor
Kilfedder, James


Brocklebank-Fowler, C.
Gow, Ian (Eastbourne)
King, Evelyn (South Dorset)


Brotherton, Michael
Gower, Sir Raymond (Barry)
Kitson, Sir Timothy


Bryan, Sir Paul
Grant, Anthony (Harrow C)
Knight, Mrs Jill


Buchanan-Smith, Alick
Gray, Hamish
Knox, David


Bulmer, Esmond
Grieve, Percy
Lamont, Norman


Burden, F. A.
Grimond, Rt Hon J.
Lawrence, Ivan


Butler, Adam (Bosworth)
Grist, Ian
Lawson, Nigel


Carlisle, Mark
Grylls, Michael
Le Marchant, Spencer


Chalker, Mrs Lynda
Hall, Sir John
Lloyd, Ian


Channon, Paul
Hall Davis, A. G. F.
Loveridge, John


Churchill, W. S.
Hamilton, Michael (Salisbury)
Luce, Richard


Clarke, Kenneth (Rushcliffe)
Hampson, Dr Keith
McAdden, Sir Stephen


Clegg, Walter
Hannam, John
Macfarlane, Neil


Cooke, Robert (Bristol W)
Harrison, Col Sir Harwood (Eye)
MacGregor, John


Cope, John
Harvie Anderson, Rt Hon Miss
McNair-Wilson, M. (Newbury)


Cordle, John H.
Hastings, Stephen
McNair-Wilson, P. (New Forest)


Crawford, Douglas
Havers, Sir Michael
Mather, Carol


Crowder, F. P.
Hawkins, Paul
Maxwell-Hyslop, Robin


Dean, Paul (N Somerset)
Hayhoe, Barney
Miller, Hal (Bromsgrove)


Dodsworth, Geoffrey
Henderson, Douglas
Mills, Peter


Douglas-Hamilton, Lord James
Hicks, Robert
Mitchell, David (Basingstoke)


Dunlop, John
Holland, Philip
Moate, Roger


Durant, Tony
Hordern, Peter
Molyneaux, James


Edwards, Nicholas (Pembroke)
Howe, Rt Hon Sir Geoffrey
Monro, Hector


Elliott, Sir William
Howell, David (Guildford)
Montgomery, Fergus


Evans, Gwynfor (Carmarthen)
Howell, Ralph (North Norfolk)
Moore, John (Croydon C)







More, Jasper (Ludlow)
Ross, William (Londonderry)
Thomas, Dafydd (Merioneth)


Morrison, Hon Peter (Chester)
Rost, Peter (SE Derbyshire)
Thompson, George


Mudd, David
Scott, Nicholas
Tugendhat, Christopher


Neave, Airey
Shaw, Giles (Pudsey)
Vaughan, Dr Gerard


Nelson, Anthony
Shelton, William (Streatham)
Viggers, Peter


Newton, Tony
Shepherd, Colin
Wainwright, Richard (Colne V)


Nott, John
Silvester, Fred
Wakeham, John


Oppenheim, Mrs Sally
Sinclair, Sir George
Walder, David (Clitheroe)


Page, John (Harrow West)
Skeet, T. H. H.
Walker, Rt Hon P. (Worcester)


Page, Rt Hon R. Graham (Crosby)
Smith, Cyril (Rochdale)
Wall, Patrick


Parkinson, Cecil
Speed, Keith
Warren, Kenneth


Penhaligon, David
Spence, John
Watt, Hamish


Percival, Ian
Spicer, Jim (W. Dorset)
Weatherill, Bernard


Powell, Rt Hon J. Enoch
Spicer, Michael (S Worcester)
Welsh, Andrew


Price, David (Eastleigh)
Sproat, lain
Wiggin, Jerry


Pym, Rt Hon Francis
Stainton, Keith
Wigley, Dafydd


Raison, Timothy
Stanbrook, Ivor
Wilson, Gordon (Dundee E)


Rathbone, Tim
Stanley, John
Winterton, Nicholas


Rees, Peter (Dover &amp; Deal)
Steel, David (Roxburgh)
Wood, Rt Hon Richard


Rees-Davies, W. R.
Stewart, Ian (Hitchin)
Young, Sir G. (Ealing, Acton)


Reid, George
Taylor, R. (Croydon NW)



Renton, Tim (Mid-Sussex)
Taylor, Teddy (Cathcart)
TELLERS FOR THE AYES:


Ridley, Hon Nicholas
Tebbit, Norman
Mr. Michael Roberts and Mr. W. Benyon.


Ridsdale, Julian
Thatcher, Rt Hon Margaret





NOES


Allaun, Frank
Edge, Geoff
McNamara, Kevin


Anderson, Donald
Edwards, Robert (Wolv SE)
Madden, Max


Archer, Peter
Ennals, David
Magee, Bryan


Armstrong, Ernest
Evans, loan (Aberdare)
Mahon, Simon


Ashton, Joe
Fernyhough, Rt Hon E.
Marks, Kenneth


Atkins, Ronald (Preston N)
Flannery, Martin
Marshall, Dr. Edmund (Goole)


Atkinson, Norman
Fletcher, Ted (Darlington)
Marshall, Jim (Leicester S)


Barnett, Guy (Greenwich)
Foot, Rt Hon Michael
Maynard, Miss Joan


Barnett, Rt Hon Joel (Heywood)
Ford, Ben
Meacher, Michael


Bates, Alf
Forrester, John
Mellish, Rt Hon Robert


Bean, R. E.
George, Bruce
Mendelson, John


Bennett, Andrew (Stockport N)
Gilbert, Dr John
Mikardo, Ian


Bidwell, Sydney
Ginsburg, David
Millan, Bruce


Bishop, E. S.
Golding, John
Miller, Dr M. S. (E Kllbride)


Blenkinsop, Arthur
Gould, Bryan
Molloy, William


Boardman, H.
Gourlay, Harry
Morris, Charles R. (Openshaw)


Booth, Rt Hon Albert
Grant, George (Morpeth)
Murray, Rt Hon Ronald King


Bottomley, Rt Hon Arthur
Grant, John (Islington C)
Newens, Stanley


Bray, Dr Jeremy
Grocott, Bruce
Oakes, Gordon


Brown, Hugh D. (Provan)
Hamilton, James (Bothwell)
Ogden, Eric


Brown, Robert C. (Newcastle W)
Harper, Joseph
Ovenden, John


Brown, Ronald (Hackney S)
Harrison, Waller (Wakefield)
Park, George


Buchan, Norman
Heffer, Eric S.
Parker, John


Buchanan, Richard
Hooley, Frank
Parry, Robert


Butler, Mrs Joyce (Wood Green)
Horam, John
Peart, Rt Hon Fred


Campbell, Ian
Boyle, Doug (Nelson)
Pendry, Tom


Canavan, Dennis
Huckfield, Les
Perry, Ernest


Cant, R. B.
Hughes, Robert (Aberdeen N)
Phipps, Dr Collin


Carmichael, Neil
Hughes, Roy (Newport)
Prentice, Rt Hon Reg


Carter-Jones, Lewis
Hunter, Adam
Price, C. (Lewisham W)


Cartwright, John
Irvine, Rt Hon Sir A. (Edge Hill)
Price, William (Rugby)


Castle, Rt Hon Barbara
Jackson, Colin (Brighouse)
Rees, Rt Hon Merlyn (Leeds S)


Clemitson, Ivor
Jackson, Miss Margaret (Lincoln)
Richardson, Miss Jo


Cocks, Michael (Bristol S)
Janner, Greville
Roberts, Albert (Normanton)


Cohen, Stanley
John, Brynmor
Roberts, Gwllym (Cannock)


Coleman, Donald
Johnson, James (Hull West)
Robinson, Geoffrey


Concannon, J. D.
Johnson, Walter (Derby S)
Roderick, Caerwyn


Conlan, Bernard
Jones, Barry (East Flint)
Rodgers, George (Chorley)


Cook, Robin F. (Edin C)
Jones, Dan (Burnley)
Rodgers, William (Stockton)


Corbett, Robin
Kaufman, Gerald
Rooker, J. W.


Craigen, J. M. (Maryhill)
Kilroy-Silk, Robert
Roper, John


Cryer, Bob
Lambie, David
Rose, Paul B.


Cunningham, G. (Islington S)
Lamborn, Harry
Ross, Rt. Hon W. (Kilmarnock)


Cunningham, Dr J. (Whiteh)
Lamond, James
Rowlands, Ted


Davidson, Arthur
Latham, Arthur (Paddington)
Sandelson, Neville


Davies, Bryan (Enfield N)
Leadbitter, Ted
Sedgemore, Brian


Davies, Denzil (Llanelli)
Lestor, Miss Joan (Eton Slough)
Selby, Harry


Davis, Clinton (Hackney C)
Lewis, Ron (Carlisle)
Sheldon, Robert (Ashton-u-Lyne)


Deakins, Eric
Litterick, Tom
Shore, Rt Hon Peter


Dean, Joseph (Leeds West)
Luard, Evan
Short, Rt Hon E. (Newcastle C)


Dempsey, James
Lyons, Edward (Bradford W)
Silkin, Rt Hon John (Deptford)


Doig, Peter
Mabon, Dr J. Dickson
Silverman, Julius


Dormand, J. D.
McCartney, Hugh
Skinner Dennis


Duffy, A. E. P.
McElhone, Frank
Smith, John (N Lanarkshire)


Dunn James A.
McGuire, Michael (Ince)
Snape, Peter


Dunnett, Jack
Mackintosh, John P.
Stallard, A. W.


Dunwoody, Mrs Gwyneth
Maciennan, Robert
Stoddart, David


Eadie, Alex
McMillan, Tom (Glasgow C)
Stott, Roger

Strang, Gavin
Watkins, David
Wilson, Rt Hon Sir Harold (Huyton)


Thomas, Ron (Bristol NW)
Watkinson, John
Wilson, William (Coventry SE)


Tinn, James
Weetch, Ken
Wise, Mrs Audrey


Tomlinson, John
Weitzman, David
Woof, Robert


Tuck, Raphael
White, Frank R. (Bury)
Wrigglesworth, Ian


Urwin, T. W.
White, James (Pollok)
Young, David (Bolton E)


Varley, Rt Hon Eric G
Williams, Alan Lee (Hornch'ch)



Wainwright, Edwin (Dearne V)
Williams, Rt Hon Shirley (Hertford)
TELLERS FOR THE NOES:


Walker, Harold (Doncaster)
Williams, Sir Thomas
Mr. Ted Graham and


Walker, Terry (Kingswood)
Wilson, Alexander (Hamilton)
Mr. John Ellis.

Division List No. 243 [see col. 564]


Division No. 243.]
AYES
[1.18 a.m.


Arnold, Tom
Hayhoe, Barney
Percival, Ian


Atkins, Rt Hon H. (Spelthorne)
Henderson, Douglas
Price, David (Eastleigh)


Awdry, Daniel
Hicks, Robert
Pym, Rt Hon Francis


Bain, Mrs Margaret
Holland, Philip
Raison, Timothy


Baker, Kenneth
Hooley, Frank
Rathbone, Tim


Beith, A. J.
Hooson, Emlyn
Rees, Peter (Dover &amp; Deal)


Bennett, Sir Frederic (Torbay)
Hordern, Peter
Rees-Davies, W. R.


Benyon, W.
Howe, Rt Hon Sir Geoffrey
Reid, George


Berry, Hon Anthony
Howell, David (Guildford)
Renton, Tim (Mid-Sussex)


Bidwell, Sydney
Howell, Ralph (North Norfolk)
Richardson, Miss Jo


Boscawen, Hon Robert
Howells, Geraint (Cardigan)
Ridsdale, Julian


Boyson, Dr Rhodes (Brent)
Hunt, David (Wirral)
Roberts, Michael (Cardiff NW)


Braine, Sir Bernard
Hunt, John
Ross, Stephen (Isle of Wight)


Brittan, Leon
Hurd, Douglas
Rost, Peter (SE Derbyshire)


Brocklebank-Fowler, C.
Hutchison, Michael Clark
Sainsbury, Tim


Bryan, Sir Paul
Jackson, Colin (Brighouse)
Sandelson, Neville


Buchanan-Smith, Alick
James, David
Scott, Nicholas


Bulmer, Esmond
Jenkin, Rt Hon P. (Wanst'd &amp; W'd'fd)
Shaw, Giles (Pudsey)


Burden, F. A.
Jessel, Toby
Shelton, William (Streatham)


Butler, Adam (Bosworth)
Johnson Smith, G. (E Grinstead)
Shepherd, Colin


Carlisle, Mark
Johnston Russell (Inverness)
Silvester, Fred


Chalker, Mrs Lynda
Jopling, Michael
Sims, Roger


Channon, Paul
Kilfedder, James
Sinclair, Sir George


Churchill, W. S.
Kilroy-Silk, Robert
Skeet, T. H. H.


Clarke, Kenneth (Rushcliffe)
King, Evelyn (South Dorset)
Smith, Cyril (Rochdale)


Clegg, Walter
Kitson, Sir Timothy
Speed, Keith


Cooke, Robert (Bristol W)
Knight, Mrs JHI
Spicer, Jim (W. Dorset)


Cope, John
Knox, David
Spicer, Michael (S Worcester)


Cordle, John H.
Lambie, David
Sproat, Iain


Craigen, J. M. (Maryhill)
Lamont, Norman
Stanbrook, Ivor


Crawford, Douglas
Lawrence, Ivan
Stanley, John


Dean, Paul (N Somerset)
Lawson, Nigel
Steel, David (Roxburgh)


Dodsworth, Geoffrey
Leadbitter, Ted
Steen, Anthony (Wavertree)


Douglas-Hamilton, Lord James
Le Marchant, Spencer
Stewart, Ian (Hitchin)


Durant, Tony
Lloyd, Ian
Stokes, John


Edwards, Nicholas (Pembroke)
Loveridge, John
Taylor, R. (Croydon NW)


Edwards, Robert (Wolv SE)
Luce, Richard
Taylor, Teddy (Cathcart)


Elliott, Sir William
Macfarlane, Neil
Tebbit, Norman


Fairgrieve, Russell
MacGregor, John
Thatcher, Rt Hon Margaret


Farr, John
McNair-Wilson, M. (Newbury)
Thomas, Dafydd (Merioneth)


Finsberg, Geoffrey
McNair-Wilson, P. (New Forest)
Thompson, George


Fisher, Sir Nigel
Marshall, Jim (Leicester S)
Tugendhat, Christopher


Fowler, Norman (Sutton C'f'd)
Mather, Carol
Vaughan, Dr Gerard


Gardiner, George (Reigate)
Maxwell-Hyslop, Robin
Viggers, Peter


Gilmour, Rt Hon Ian (Chesham)
Mayhew, Patrick
Wainwright, Richard (Colne V)


Gilmour, Sir John (East Fife)
Maynard, Miss Joan
Wakeham, John


Glyn, Dr Alan
Meyer, Sir Anthony
Walder, David (Clitheroe)


Godber, Rt Hon Joseph
Mills, Peter
Walker, Rt Hon P. (Worcester)


Goodhart, Philip
Mitchell, David (Basingstoke)
Wall, Patrick


Goodhew, Victor
Molloy, William
Warren, Kenneth


Gow, Ian (Eastbourne)
Monro, Hector
Watt, Hamish


Gower, Sir Raymond (Barry)
Montgomery, Fergus
Weatherill, Bernard


Grant, Anthony (Harrow C)
Moore, John (Croydon C)
Welsh, Andrew


Gray, Hamish
Morrison, Hon Peter (Chester)
Wiggin, Jerry


Grylls, Michael
Mudd, David
Wigley, Dafydd


Hall, Sir John
Neave, Airey
Wilson, Gordon (Dundee E)


Hall_Davis, A. G. F.
Neubert, Michael
Winterton, Nicholas


Hamilton, Michael (Salisbury)
Newton, Tony
Wise, Mrs Audrey


Hampson, Dr Keith
Nott, John
Wood, Rt Hon Richard


Hannam, John
Oppenheim, Mrs Sally
Young, Sir G. (Ealing, Acton)


Harrison, Col Sir Harwood (Eye)
Page, John (Harrow West)



Harvie Anderson, Rt Hon Miss
Page, Rt Hon R. Graham (Crosby)
TELLERS FOR THE AYES:


Hastings, Stephen
Parkinson, Cecil
Dr. Colin Phipps and


Havers, Sir Michael
Parry, Robert
Mr. J. W. Hooker.


Hawkins, Paul
Penhaligon, David





NOES


Anderson, Donald
Ashton, Joe
Barnett, Guy (Greenwich)


Archer, Peter
Atkins, Ronald (Preston N)
Barnett, Rt Hon Joel (Heywood)


Armstrong, Ernest
Atkinson, Norman
Bean, R. E.

Bishop, E. S.
Graham, Ted
Pendry, Tom


Boardman, H.
Grant, George (Morpeth)
Perry, Ernest


Booth, Rt Hon Albert
Grant, John (Islington C)
Powell, Rt Hon J. Enoch


Bottomley, Rt Hon Arthur
Grocott, Bruce
Prentice, Rt Hon Reg


Bray, Dr Jeremy
Hamilton, James (Bothwell)
Price, William (Rugby)


Brown, Hugh D. (Provan)
Harrison, Walter (Wakefield)
Rees, Rt Hon Merlyn (Leeds S)


Buchan, Norman
Heffer, Eric S.
Roberts, Albert (Normanton)


Buchanan, Richard
Horam, John
Roberts, Gwilym (Cannock)


Butler, Mrs Joyce (Wood Green)
Hoyle, Doug (Nelson)
Robinson, Geoffrey


Campbell, Ian
Huckfield, Les
Roderick, Caerwyn


Canavan, Dennis
Hughes, Robert (Aberdeen N)
Rodgers, George (Chorley)


Cant, R. B.
Hughes, Roy (Newport)
Rodgers, William (Stockton)


Carmichael, Neil
Hunter, Adam
Roper, John


Carter-Jones, Lewis
Irvine, Rt Hon Sir A. (Edge Hill)
Ross, Rt. Hon W. (Kilmarnock)


Cartwright, John
Jackson, Miss Margaret (Lincoln)
Rowlands, Ted


Castle, Rt Hon Barbara
Janner, Greville
Sedgemore, Brian


Clemitson, Ivor
John, Brynmor
Selby, Harry


Cocks, Michael (Bristol S)
Johnson, James (Hull West)
Sheldon, Robert (Ashton-u-Lyne)


Cohen, Stanley
Johnson, Walter (Derby S)
Shore, Rt Hon Peter


Coleman, Donald
Jones, Barry (East Flint)
Short, Rt Hon E. (Newcastle C)


Concannon, J. D.
Jones, Dan (Burnley)
Silkin, Rt Hon John (Deptford)


Conlan, Bernard
Kaufman, Gerald
Silverman, Julius


Corbett, Robin
Lamborn, Harry
Skinner, Dennis


Cryer, Bob
Lamond, James
Smith, John (N Lanarkshire)


Cunningham, G. (Islington S)
Latham, Arthur (Paddington)
Snape, Peter


Cunningham, Dr J. (Whiteh)
Lewis, Ron (Carlisle)
Stallard, A. W.


Davidson, Arthur
Litterick, Tom
Stoddart, David


Davies, Bryan (Enfield N)
Lomas, Kenneth
Stott, Roger


Davies, Denzil (Llanelli)
Luard, Evan
Strang, Gavin


Davis, Clinton (Hackney C)
Lyons, Edward (Bradford W)
Thomas, Ron (Bristol NW)


Deakins, Eric
Mabon, Dr J. Dickson
Tinn, James


Dean, Joseph (Leeds West)
McCartney, Hugh
Tomlinson, John


Dempsey, James
McElhone, Frank
Tuck, Raphael


Doig, Peter
McGuire, Michael (Ince)
Urwin, T. W.


Dormand, J. D.
Maclennan, Robert
Varley, Rt Hon Eric G


Duffy, A. E. P.
McMillan, Tom (Glasgow C)
Wainwright, Edwin (Dearne V)


Dunn, James A.
McNamara, Kevin
Walker, Harold (Doncaster)


Dunnett, Jack
Madden, Max
Walker, Terry (Kingswood)


Eadie, Alex
Magee, Bryan
Watkins, David


Edge Geoff
Mahon, Simon
Watkinson, John


Ellis, John (Brigg &amp; Scun)
Marks, Kenneth
Weetch, Ken


Ennals, David
Marshall, Dr. Edmund (Goole)
White, Frank R. (Bury)


Evans, loan (Aberdare)
Meacher, Michael
Williams, Alan Lee (Hornch'ch)


Fernyhough, Rt Hon E.
Mellish, Rt Hon Robert
Williams, Rt Hon Shirley (Hertford)


Flannery, Martin
Mendelson, John
Williams, Sir Thomas


Fletcher, Ted (Darlington)
Mikardo, Ian
Wilson, Alexander (Hamilton)


Foot, Rt Hon Michael
Millan, Bruce
Wilson, Sir Harold (Huyton)


Forrester, John
Miller, Dr M. S. (E Kilbride)
Wilson, William (Coventry SE)


Fraser, Rt Hon H. (Stafford &amp; St)
Molyneaux, James
Woof, Robert


Fraser, John (Lambeth, N'w'd)
Morris, Charles R. (Openshaw)
Wrigglesworth, Ian


George, Bruce
Murray, Rt Hon Ronald King
Young, David (Bolton E)


Gilbert, Dr John
Oakes, Gordon



Ginsburg, David
Ogden, Eric
TELLERS FOR THE NOES:


Golding, John
Park, George
Mr. Joseph Harper and


Gould, Bryan
Parker, John
Mr. Alf Bates.


Gourlay, Harry

Division List No. 244 [see col. 574]


Division No. 244.]
AYES
[2.0 a.m.


Arnold, Tom
Durant, Tony
Howe, Rt Hon Sir Geoffrey


Atkins, Rt Hon H. (Spelthorne)
Edwards, Nicholas (Pembroke)
Howell, David (Guildford)


Bain, Mrs Margaret
Elliot), Sir William
Howell, Ralph (North Norfolk)


Baker, Kenneth
Fairgrieve, Nicholas
Hunt, David (Wirral)


Beith, A. J.
Farr, John
Hunt, John (Bromley)


Bennett, Sir Frederic (Torbay)
Finsberg, Geoffrey
Hurd, Douglas


Berry, Hon Anthony
Fowler, Norman (Sutton C'f'd)
Hutchison, Michael Clark


Boscawen, Hon Robert
Gardiner, George (Reigate)
James, David


Boyson, Dr Rhodes (Brent)
Gilmour, Rt Hon Ian (Chesham)
Jenkin, Rt Hon P. (Wanet'd &amp; W'd'fd)


Braine, Sir Bernard
Gilmour, Sir John (East Fife)
Johnson Smith, G. (E Grinstead)


Brittan, Leon
Glyn, Dr Alan
Jopling, Michael


Brocklebank-Fowler, C.
Goodhart, Philip
King, Evelyn (South Dorset)


Brotherton, Michael
Goodhew, Victor
Kitson, Sir Timothy


Bulmer, Esmond
Gower, Sir Raymond (Barry)
Knight, Mrs Jill


Burden, F. A.
Grant, Anthony (Harrow C)
Knox, David


Butler, Adam (Bosworth)
Grylls, Michael
Lamont, Norman


Carlisle, Mark
Hall, Sir John
Lawrence, Ivan


Chalker, Mrs Lynda
Hall-Davis, A. G. F.
Lowson, Nigel


Channon, Paul
Hamilton, Michael (Salisbury)
Le Marchant, Spencer


Churchill, W. S.
Hampson, Dr Keith
Loveridge, John


Clarke, Kenneth (Rushcliffe)
Hannam, John
Luce, Richard


Clegg, Walter
Harrison, Col Sir Harwood (Eye)
Macfarlane, Neil


Cooke, Robert (Bristol W)
Harvie Anderson, Rt Hon Miss
MacGregor, John


Cope, John
Hawkins, Paul
McNair-Wilson, M. (Newbury)


Dean, Paul (N Somerset)
Hayhoe, Barney
McNair-Wilson, P. (New Forest)


Dodsworth, Geoffrey
Hicks, Robert
Mather, Carol


Douglas-Hamilton, Lord James
Hordern, Peter
Maxwell-Hyslop, Robin

Mayhew, Patrick
Raison, Timothy
Stewart, Ian (Hitchin)


Meyer, Sir Anthony
Rathbone, Tim
Stokes, John


Miller, Hal (Bromsgrove)
Rees, Peter (Dover &amp; Deal)
Taylor, Teddy (Cathcart)


Mills, Peter
Rees-Davies, W. R.
Tebbit, Norman


Mitchell, David (Basingstoke)
Reid, George
Thatcher, Rt Hon Margaret


Monro, Hector
Renton, Tim (Mid-Sussex)
Thompson, George


Montgomery, Fergus
Ridley, Hon Nicholas
Tugendhat, Christopher


Moore, John (Croydon C)
Roberts, Michael (Cardiff NW)
Vaughan, Dr Gerard


Morrison, Hon Peter (Chester)
Ross, Stephen (Isle of Wight)
Viggers, Peter


Mudd, David
Shaw, Giles (Pudsey)
Wakeham, John


Neave, Airey
Shelton, William (Streatham)
Walder, David (Clitheroe)


Neubert, Michael
Shepherd, Colin
Walker, Rt Hon P. (Worcester)


Newton, Tony
Sims, Roger
Warren, Kenneth


Nott, John
Sinclair, Sir George
Weatherill, Bernard


Oppenheim, Mrs Sally
Skeet, T. H. H.
Welsh, Andrew


Page, John (Harrow West)
Smith, Cyril (Rochdale)
Wiggin, Jerry


Page, Rt Hon R. Graham (Crosby)
Speed, Keith
Wigley, Defydd


Parkinson, Cecil
Spicer, Jim (W. Dorset)
Wilson, Gordon (Dundee E)


Penhaligon, David
Spicer, Michael (S Worcester)
Young, Sir G. (Ealing, Acton)


Percival, Ian
Sproat, lain



Powell, Rt Hon J. Enoch
Stanbrook, Ivor
TELLERS FOR THE AYES:


Price, David (Eastleigh)
Stanley, John
Mr. Fred Silvester and


Pym, Rt Hon Francis
Steen, Anthony (Wavertree)
Mr. W. Benyon.




NOES


Anderson, Donald
Fraser, John (Lambeth, N'w'd)
Molloy, William


Archer, Peter
George, Bruce
Morris, Charles R. (Openshaw)


Armstrong, Ernest
Gilbert, Dr John
Murray, Rt Hon Ronald King


Ashton, Joe
Golding, John
Oakes, Gordon


Atkins,, Ronald (Preston N)
Gould, Bryan
Ogden, Eric


Atkinson, Norman
Graham, Ted
Park, George


Barnett, Rt Hon Joel (Heywood)
Grant, George (Morpeth)
Parry, Robert


Bates, Alf
Grant, John (Islington C)
Pendry, Tom


Bean, R. E.
Grocott, Bruce
Phipps, Dr Colin


Bennett, Andrew (Stockport N)
Hamilton, James (Bothwell)
Prentice, Rt Hon Reg


Bishop, E. S.
Harper, Joseph
Price, C. (Lewisham W)


Bottomley, Rt Hon Arthur
Harrison, Walter (Wakefield)
Price, William (Rugby)


Bray, Dr Jeremy
Heffer, Eric S.
Richardson, Miss Jo


Brown, Hugh D. (Provan)
Horam, John
Roberts, Gwilym (Cannock)


Brown, Ronald (Hackney S)
Hoyle, Doug (Nelson)
Robinson, Geoffrey


Buchan, Norman
Huckfield, Les
Roderick, Caerwyn


Buchanan, Richard
Hughes, Robert (Aberdeen N)
Rodgers, George (Chorley)


Campbell, Ian
Hunter, Adam
Rodgers, William (Stockton)


Canavan, Dennis
Jackson, Colin (Brighouse)
Rooker, J. W.


Cant, R. B.
Jackson, Miss Margaret (Lincoln)
Roper, John


Carmichael, Neil
Janner, Greville
Ross, Rt. Hon W. (Kilmarnock)


Carter-Jones, Lewis
John, Brynmor
Rowlands, Ted


Cartwright, John
Johnson, James (Hull West)
Sandelson, Neville


Castle, Rt Hon Barbara
Johnson, Walter (Derby S)
Sedgemore, Brian


Clemitson, Ivor
Jones, Barry (East Flint)
Selby, Harry


Cocks, Michael (Bristol S)
Jones, Dan (Burnley)
Sheldon, Robert (Ashton-u-Lyne)


Cohen, Stanley
Kaufman, Gerald
Shore, Rt Hon Peter


Coleman, Donald
Kilroy-Silk, Robert
Short, Rt Hon E. (Newcastle C)


Concannon, J. D.
Lambie, David
Silverman, Julius


Conlan, Bernard
Lamborn, Harry
Skinner Dennis


Cook, Robin F. (Edin C)
Lamond, James
Smith, John (N Lanarkshire)


Corbett, Robin
Latham, Arthur (Paddington)
Snape, Peter


Craigen, J. M. (Maryhill)
Leadbitter, Ted
Stallard, A. W.


Cryer, Bob
Lewis, Ron (Carlisle)
Stoddart, David


Cunningham, G. (Islington S)
Litterick, Tom
Stott, Roger


Cunningham, Dr J. (Whiteh)
Lomas, Kenneth
Strang, Gavin


Davidson, Arthur
Luard, Evan
Thomas, Ron (Bristol NW)


Davies, Bryan (Enfield N)
Lyons, Edward (Bradford W)
Tomlinson, John


Davies. Denzil (Llanelli)
Mabon, Dr J. Dickson
Urwin, T. W.


Davis, Clinton (Hackney C)
McCartney, Hugh
Varley, Rt Hon Eric G


Dean, Joseph (Leeds West)
McElhone, Frank
Wainwright, Edwin (Dearne V)


Dempsey, James
McGuire, Michael (Ince)
Walker, Harold (Doncaster)


Doig, Peter
Maclennan, Robert
Walker, Terry (Kingswood)


Dormand, J. D.
McMillan, Tom (Glasgow C)
Watkins, David


Duffy, A. E. P.
McNamara, Kevin
Watkinson, John


Dunn, James A.
Madden, Max
Williams, Alan Lee (Hornch'ch)


Eadie, Alex
Magee, Bryan
Wilson, Alexander (Hamilton)


Edge, Geoff
Mahon, Simon
Wilson, William (Coventry SE)


Ellis, John (Brigg &amp; Scun)
Marshall, Dr. Edmund (Goole)
Wise, Mrs Audrey


Ennals, David
Maynard, Miss Joan
Woof, Robert


Evans, loan (Aberdare)
Meacher, Michael
Wrigglesworth, Ian


Fernyhough, Rt Hon E.
Mellish, Rt Hon Robert
Young, David (Bolton E)


Flannery, Martin
Mendelson, John



Fletcher, Ted (Darlington)
Mikardo, Ian
TELLERS FOR THE NOES:


Foot, Rt Hon Michael
Millan, Bruce
Mr. Frank White and


Ford, Ben
Miller, Dr M. S. (E Kilbride)
Mr. James Tinn


Forrester, John